-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sl4kH8XK/l42fz3zjD+FU75WtuKqpbxI3qXlamoc3S2CHhNBkxVQJWzdPRuIDy1U znhIFPPXR2LNWNLGZsZLkA== 0000930661-99-002661.txt : 19991117 0000930661-99-002661.hdr.sgml : 19991117 ACCESSION NUMBER: 0000930661-99-002661 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WYNDHAM INTERNATIONAL INC CENTRAL INDEX KEY: 0000715273 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS, ROOMING HOUSE, CAMPS & OTHER LODGING PLACES [7000] IRS NUMBER: 942878485 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09320 FILM NUMBER: 99753264 BUSINESS ADDRESS: STREET 1: 1950 STEMMONS FRWY STREET 2: STE 6001 CITY: DALLAS STATE: TX ZIP: 75207 BUSINESS PHONE: 2148631000 MAIL ADDRESS: STREET 1: 1950 STEMMONS FRWY STREET 2: STE 6001 CITY: DALLAS STATE: TX ZIP: 75207 FORMER COMPANY: FORMER CONFORMED NAME: PATRIOT AMERICAN HOSPITALITY OPERATING CO\DE DATE OF NAME CHANGE: 19970723 FORMER COMPANY: FORMER CONFORMED NAME: BAY MEADOWS OPERATING CO DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-9320 ---------------- WYNDHAM INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 94-2878485 (I.R.S. Employer Identification No.) 1950 Stemmons Freeway, Suite 6001 Dallas, Texas 75207 (Address of principal executive offices) (Zip Code) (214) 863-1000 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] The number of shares outstanding of the registrant's class of common stock, par value $.01 per share, as of the close of business on November 10, 1999, was 167,661,671. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- WYNDHAM INTERNATIONAL, INC. INDEX PART I--FINANCIAL INFORMATION
Page ---- Item 1. Financial Statements.............................................. 2 Wyndham International, Inc.: Condensed Consolidated Balance Sheets as of September 30, 1999 (unaudited) and December 31, 1998...................................... 3 Condensed Consolidated Statements of Operations for the three and nine month periods ended September 30, 1999 and 1998 (unaudited)............ 4 Condensed Consolidated Statements of Cash Flows for the nine month periods ended September 30, 1999 and 1998 (unaudited).................. 5 Notes to Condensed Consolidated Financial Statements as of September 30, 1999 (unaudited)....................................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................. 23 Item 3. Qualitative and Quantitative Disclosures about Market Risks....... 39 PART II--OTHER INFORMATION Item 1. Legal Proceedings................................................. 40 Item 2. Changes in Securities and Use of Proceeds......................... 43 Item 4. Submission of Matters to Vote of Security Holders................. 43 Item 6. Exhibits and Reports on Form 8-K: Exhibits.............................................................. 43 Reports on Form 8-K................................................... 43 Signatures................................................................ 44
2 WYNDHAM INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
September 30, December 31, 1999 1998 ------------- ------------ (unaudited) ASSETS Current assets: Cash and cash equivalents.......................... $ 113,763 $ 123,085 Restricted cash.................................... 102,321 35,869 Accounts and lease revenue receivable.............. 192,813 194,583 Inventories........................................ 23,832 23,583 Prepaid expenses and other assets.................. 32,526 35,346 ----------- ---------- Total current assets.............................. 465,255 412,466 ----------- ---------- Investment in real estate and related improvements net of accumulated depreciation of $438,644 in 1999 and $252,580 in 1998............................... 5,498,237 5,585,616 Investment in unconsolidated subsidiaries........... 177,164 146,912 Mortgage notes and other receivables from unconsolidated subsidiaries........................ 1,982 78,403 Notes and other receivables......................... 37,456 41,334 Management contract costs, net of accumulated amortization $23,649 in 1999 and $11,258 in 1998... 124,610 194,014 Leasehold costs, net of accumulated amortization of $12,976 in 1999 and $5,989 in 1998................. 135,431 179,922 Trade names and franchise costs, net of accumulated amortization of $9,882 in 1999 and $6,670 in 1998.. 104,722 125,974 Deferred acquisition costs.......................... 17,234 16,144 Goodwill and intangibles, net of accumulated amortization of $27,778 in 1999 and $20,895 in 1998............................................... 364,733 553,889 Deferred expenses, net of accumulated amortization of $41,318 in 1999 and $29,136 in 1998............. 97,925 37,998 Other assets........................................ 46,760 42,998 ----------- ---------- Total assets...................................... $ 7,071,509 $7,415,670 =========== ========== LIABILITES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses.............. $ 237,521 $ 313,657 Deposits........................................... 35,663 26,392 Current portion of borrowings credit facility, term loans, mortgage notes and capital lease obligations....................................... 131,499 1,274,918 ----------- ---------- Total current liabilities......................... 404,683 1,614,967 ----------- ---------- Borrowings under credit facility, term loans, mortgage notes and capital lease obligations....... 3,418,041 2,582,603 Deferred income taxes............................... 730,946 123,463 Due to unconsolidated subsidiaries.................. 374 7,919 Deferred income..................................... 15,956 174 Minority interest in the Operating Partnerships..... 23,590 253,970 Minority interest in other consolidated subsidiaries....................................... 167,203 229,537 Commitments and contingencies Shareholders' equity: Preferred stock, $0.01 par value; authorized: 150,000,000 shares; shares issued and outstanding: 10,170,599 in 1999................................ 102 -- Preferred stock, $0.01 par value; authorized: 100,000,000 shares; shares issued and outstanding: 8,981,886 in 1998................................. -- 90 Excess stock, $0.01 par value; authorized: 750,000,000 shares; no shares issued and outstanding....................................... -- -- Common stock, $0.01 par value; authorized: 750,000,000 shares; shares issued and outstanding: 167,240,510 in 1999 and 213,521,647 in 1998....... 1,672 4,270 Additional paid in capital......................... 3,737,252 3,024,540 Receivable from shareholders and affiliates........ (16,984) (16,364) Unearned stock compensation, net of accumulated amortization of $19,144 in 1999 and $13,447 in 1998.............................................. (409) (5,494) Unrealized loss on securities available for sale... (1,060) (1,245) Unrealized foreign exchange gain................... 294 2,749 Accumulated deficit................................ (1,410,151) (405,509) ----------- ---------- Total shareholders' equity........................ 2,310,716 2,603,037 ----------- ---------- Total liabilities and shareholders' equity....... $ 7,071,509 $7,415,670 =========== ==========
See notes to condensed consolidated financial statements. 3 WYNDHAM INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share amounts) (unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------------- ---------------------- 1999 1998 1999 1998 -------- --------- ---------- ---------- Revenue: Hotel revenue................... $562,720 $ 554,331 $1,829,882 $1,266,985 Participating and land lease revenue........................ 341 8,932 929 49,627 Racecourse facility............. -- 9,955 4,561 34,945 Management fee and service fee income......................... 13,968 24,358 57,186 61,574 Interest and other income....... 2,252 6,274 8,951 12,949 -------- --------- ---------- ---------- Total revenue................... 579,281 603,850 1,901,509 1,426,080 -------- --------- ---------- ---------- Expenses: Hotel expenses.................. 429,370 417,814 1,325,646 924,471 Racing facility operations...... -- 8,810 3,867 29,667 General and administrative...... 32,238 26,571 143,596 64,558 Cost of acquiring leaseholds and license agreements............. -- 3,940 803 61,000 Restructuring costs............. 3,906 -- 189,288 -- Interest expense................ 85,478 82,739 266,678 172,191 Depreciation and amortization... 75,653 68,236 232,558 155,165 Net (gain) loss on sale of assets......................... (1,104) -- 4,223 -- Treasury lock settlement........ -- 49,225 -- 49,225 -------- --------- ---------- ---------- Total expenses.................. 625,541 657,335 2,166,659 1,456,277 -------- --------- ---------- ---------- Operating loss................... (46,260) (53,485) (265,150) (30,197) Equity in (losses) earnings of unconsolidated subsidiaries.... (931) 1,888 3,000 7,375 -------- --------- ---------- ---------- Loss before income tax provision, minority interests and extraordinary item.............. (47,191) (51,597) (262,150) (22,822) Income tax benefit (provision)... 3,386 (6,783) (651,053) (11,273) -------- --------- ---------- ---------- Loss before minority interests and extraordinary item.......... (43,805) (58,380) (913,203) (34,095) Minority interest in the Operating Partnerships.......... -- 4,722 6,642 6,169 Minority interest in other consolidated subsidiaries....... (760) (4,500) (4,824) (7,514) -------- --------- ---------- ---------- Loss before extraordinary item... (44,565) (58,158) (911,385) (35,440) Extraordinary loss from early extinguishment of debt, net of minority interest and income taxes........................... -- (1,257) (9,838) (31,817) -------- --------- ---------- ---------- Net loss........................ $(44,565) $ (59,415) $ (921,223) $ (67,257) ======== ========= ========== ========== Basic loss attributable to common shareholders: Net loss........................ (44,565) (59,415) (921,223) (67,257) Adjustment for equity forwards.. -- -- (19,372) -- Preferred stock dividends....... (24,375) (2,695) (25,276) (4,250) -------- --------- ---------- ---------- Basic net loss.................. $(68,940) $ (62,110) $ (965,871) $ (71,507) ======== ========= ========== ========== Basic loss per common share: Loss before extraordinary item.. $ (0.41) $ (0.39) $ (6.00) $ (0.30) Extraordinary loss.............. -- (0.01) (0.06) (0.24) -------- --------- ---------- ---------- Net loss per common share....... $ (0.41) $ (0.40) $ (6.06) $ (0.54) ======== ========= ========== ========== Diluted loss to common shareholders: Net loss........................ $(44,565) $ (59,415) $ (921,223) $ (67,257) Adjustment for equity forwards.. -- (95,063) (39,322) (122,431) Preferred stock dividends....... (24,375) (2,695) (25,276) (4,250) -------- --------- ---------- ---------- Diluted net loss................ $(68,940) $(157,173) $ (985,821) $ (193,938) ======== ========= ========== ========== Diluted loss per common share: Loss before extraordinary item.. $ (0.41) $ (1.01) $ (6.13) $ (1.22) Extraordinary loss.............. -- (0.01) (0.06) (0.24) -------- --------- ---------- ---------- Net loss per common share....... $ (0.41) $ (1.02) $ (6.19) $ (1.46) ======== ========= ========== ==========
See notes to condensed consolidated financial statements. 4 WYNDHAM INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands, except per share amounts) (unaudited)
Nine Months Ended September 30, ------------------------ 1999 1998 ----------- ----------- Cash flows from operating activities: Net loss............................................ $ (921,223) $ (67,257) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation....................................... 190,714 120,864 Amortization of unearned stock compensation........ 5,697 4,818 Amortization of deferred loan costs................ 29,633 18,075 Amortization of management contracts and trade names............................................. 15,498 15,523 Amortization of goodwill and other assets.......... 26,346 18,778 Cost of acquiring leaseholds....................... -- 55,638 Treasury lock settlement........................... -- 49,225 Net loss on sale of assets......................... 4,223 -- Issuance of stock for bonuses and directors' fee... 174 -- Equity in earnings of unconsolidated subsidiaries...................................... (3,000) 880 Minority interest in Operating Partnerships........ (6,642) (7,375) Minority interest in other consolidated subsidiaries...................................... 4,824 (6,169) Deferred income taxes.............................. 622,025 7,514 Write-down of real estate assets................... 53,524 (5,352) Write-off of intangible assets..................... 119,751 -- Bad debt expense................................... 5,495 -- Extraordinary loss from early extinguishment of debt.............................................. 9,838 32,235 Other.............................................. 428 -- Changes in assets and liabilities: Accounts and lease revenue receivable and other assets............................................ (14,207) (25,272) Inventories........................................ 184 (1,137) Accounts payable and accrued expenses.............. (39,124) 20,282 ----------- ----------- Net cash provided by operating activities........ 104,158 231,270 ----------- ----------- Cash flows from investing activities: Acquisition of hotel properties and related working capital assets..................................... (69,951) (1,349,705) Improvements and additions to hotel properties...... (146,542) (187,695) Net proceeds from asset sales....................... 70,108 17,734 Acquisition of management contracts................. (5,695) (32,299) Cash received in acquisition of real estate and hotel leases....................................... 1,100 98,312 Collections on other notes receivable............... 2,681 9,563 Advances on other notes receivable.................. (11,229) -- Increase in restricted cash accounts................ (62,973) (8,283) Investment in unconsolidated subsidiaries........... (13,720) (13,985) Deferred acquisition costs.......................... (7,230) (34,780) Net payments collected from unconsolidated subsidiaries....................................... -- 5,976 Investment in mortgage and other notes receivable... -- (3,688) Collections on mortgage and other notes receivable.. 1,973 -- Proceeds from termination of management contracts... 16,086 -- Other............................................... 5,065 (1,467) ----------- ----------- Net cash used in investing activities............ (220,327) (1,500,317) ----------- ----------- Cash flows from financing activities: Borrowings under credit facility, term loans, mortgage notes and capital lease obligations....... 2,718,430 2,749,394 Net repayments on credit facility and other debt.... (3,036,685) (1,524,481) Payment of deferred loan costs...................... (107,244) (32,729) Settlement of forward equity contracts.............. (329,481) -- Proceeds from issuance of preferred stock........... 1,000,000 -- Cost to retire Patriot series B preferred stock..... (13,966) -- Cash settlement with Interstate upon spinoff........ (17,102) -- Proceeds from issuance of common stock.............. -- 277,474 Payment of offering costs........................... (76,942) (3,805) Contributions received from minority interest in consolidated subsidiaries.......................... -- 3,440 Collections on notes receivable from shareholders and affiliates..................................... -- 2,999 Distribution to minority interest holders........... (23,168) -- Dividends and distributions paid.................... (8,211) (131,038) Foreign currency translation adjustment............. 994 -- Other............................................... 222 3,647 ----------- ----------- Net cash provided by financing activities........ 106,847 1,344,901 ----------- ----------- Net (decrease) increase in cash and cash equivalents......................................... (9,322) 75,854 ----------- ----------- Cash and cash equivalents at beginning of period..... 123,085 42,431 ----------- ----------- Cash and cash equivalents at end of period........... $ 113,763 $ 118,285 =========== ===========
See notes to condensed consolidated financial statements. 5 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (unaudited) 1. ORGANIZATION AND BASIS OF PRESENTATION Patriot American Hospitality, Inc. (collectively with its subsidiaries, "Patriot"), was formed April 17, 1995 as a self-administered real estate investment trust ("REIT") for the purpose of acquiring equity interests in hotel properties. Wyndham International, Inc. (collectively with its subsidiaries, "Old Wyndham") was formed in connection with Patriot's merger with and into California Jockey Club and Bay Meadows Operating Company on July 1, 1997. Patriot and Old Wyndham are both Delaware corporations. Prior to June 30, 1999, the shares of common stock of Patriot were paired and traded together with the shares of Old Wyndham, on a one for one basis, as a single unit pursuant to a stock pairing arrangement, and were referred to as a paired share. Effective June 30, 1999, Patriot and Old Wyndham completed a series of transactions (See Note 4) which included a restructuring of their existing organizational structure. As a result of this restructuring, a wholly-owned subsidiary of Old Wyndham was merged with and into Patriot, with Patriot being the surviving entity. As such, Patriot is now a wholly-owned subsidiary of Old Wyndham, and this combined entity, together with all subsidiaries, is hereafter referred to as Wyndham. When the term Wyndham is used relating to a period prior to June 30, 1999, such term refers to the combined entity of Old Wyndham and Patriot. In connection with this restructuring, the pairing agreement between Patriot and Old Wyndham was terminated, Patriot's status as a real estate investment trust terminated effective January 1, 1999, and Patriot became a taxable corporation as of that date. The restructuring was reflected as a reorganization of two companies under common control and was accounted for in a manner similar to that used in pooling of interests accounting. As such, there was no revaluation of the assets and liabilities of Old Wyndham or Patriot. The 1999 financial statements of Wyndham are presented on a consolidated basis, representing the operations of the corporation and its subsidiaries, including Patriot. The 1998 financial statements of Wyndham are presented on a combined basis, representing the combined results of both Old Wyndham and Patriot. Unless otherwise stated herein, all information with respect to shares refers to Wyndham common stock since June 30, 1999 and to paired shares for periods before June 30, 1999. Patriot, through its wholly-owned subsidiary, PAH GP, Inc., is the sole general partner and the holder of a 1% general partnership interest in Patriot American Hospitality Partnership, L.P. (the "Patriot Partnership"). In addition, Patriot, through its wholly-owned subsidiary, PAH LP, Inc., owns an approximate 99% limited partnership interest in the Patriot Partnership. Wyndham owns a 1% general partnership interest and an approximate 99% interest in Wyndham International Operating Partnership, L.P. (the "Wyndham Partnership") as of September 30, 1999. The Patriot Partnership and the Wyndham Partnership are collectively referred to as the Operating Partnerships. The Patriot Partnership principally owns, directly or indirectly, interests in hotel properties and third party leaseholds. The Wyndham Partnership, directly or indirectly, principally leases hotel properties from the Patriot Partnership, owns interests in other hotel properties, and manages and franchises hotels for third parties. As of September 30, 1999, Wyndham, through the Operating Partnerships and other subsidiaries, owned interests in 175 hotels with an aggregate of over 43,000 guest rooms and leased 39 hotels from third parties with over 5,700 rooms. In addition, Wyndham manages 89 hotels for third party owners with over 21,000 guest rooms and franchises 11 hotels with over 2,600 guest rooms. 6 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited) Principles of consolidation and combination The unaudited consolidated financial statements for 1999 include the accounts of Wyndham, its wholly-owned subsidiaries, including Patriot, and the partnerships, corporations and limited liability companies in which Wyndham owns a controlling interest. The 1998 financial statements of Wyndham are presented on a combined basis, representing the combined results of both Old Wyndham and Patriot. All significant intercompany accounts and transactions have been eliminated. Partnerships--control is determined in accordance with generally accepted accounting principles ("GAAP"). The condition for control is the ownership of a majority voting interest and the ownership of the general partnership interest. Corporations and Limited Liability Companies--control is determined in accordance with GAAP. The condition for control is the ownership of a majority voting interest. These financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. For further information, refer to the combined financial statements and footnotes thereto included in Patriot's and Old Wyndham's Joint Annual Report on Form 10-K, as amended, for the year ended December 31, 1998. Certain prior period amounts have been reclassified to conform to current period presentation with no effect to previously reported net income or retained earnings. 2. ACQUISITIONS AND DISPOSALS Disposals In February 1999, Patriot and Old Wyndham sold their interest in the Bay Meadows Racecourse located in San Mateo, California. Patriot and Old Wyndham received cash proceeds of approximately $3,446 after payment of legal costs and other closing costs. Patriot and Old Wyndham recognized an estimated impairment loss on assets held for sale of $42,278 related to the racecourse facility in 1998. The actual loss on the sale of the racecourse facility was $42,766. In March 1999, Patriot sold the Holiday Inn Crockett, realizing net cash proceeds of approximately $18,000 and recognized a gain of approximately $2,586. On April 30, 1999, Patriot sold the following hotels; Hampton Inn Rochester, Hampton Inn Jacksonville, Hampton Inn Cleveland, and the Hampton Inn Canton, for net proceeds of approximately $23,469 and recognized a loss of approximately $1,353. On May 11, 1999, Patriot sold the Holiday Inn Sebring for net proceeds of approximately $4,100 and recognized a gain of approximately $570. On July 30, 1999, Wyndham sold the Holiday Inn Redmont for net cash proceeds of $1,830 and recognized a loss of approximately $191. 7 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited) Acquisitions In January 1999, Patriot acquired the remaining 25% minority interests in each of the five following hotels; Embassy Suites Schaumburg, the Hilton Dania, the Marriott Suites at Valley Forge, the Marriott Boston Andover and the Marriott Tysons Corner from CIGNA. The acquisition of these interests was financed through additional mortgage indebtedness totaling $49,800 and the sale of an additional 10% interest in the Marriott Warner Center. In April 1999, Patriot acquired the remaining 10% minority interests in each of the four following hotels; the Radisson Akron; the Courtyard Beachwood; the Holiday Inn Westlake; the Radisson Beachwood from IAH Snavely L.L.C. ("Snavely"). In addition, Patriot sold the Holiday Inn Beachwood to Snavely. The transaction generated net proceeds of approximately $8,770. Patriot recorded a loss of approximately $6,625. On May 7, 1999, Patriot exercised its option to purchase ISIS 2000, formerly owned by certain related parties and Old Wyndham senior executive officers, for a cash payment of $3,073. Subsequent to the exercise of the option, Wyndham owns 100% of this entity which provides reservations and other services to Wyndham. On May 18, 1999, Patriot purchased the Billerica hotel for a total purchase price of approximately $23,775 including assumed indebtedness of approximately $16,411. On July 30, 1999, a wholly-owned subsidiary of Wyndham merged with Gencom Interest, Inc. As a result of the merger, Wyndham acquired the remaining 34.52% interest in the Omni Baltimore hotel, and 421,161 shares of Wyndham Class A common stock owned by Gencom Interest, Inc. The total purchase consideration for the merger was approximately $6,043 which consisted of 1,336,276 shares of Wyndham Class A common stock. On September 10, 1999, Wyndham acquired the remaining 75% interest in Le Manoir de Gressey, an 86 room hotel located near Paris, France for a total purchase price of approximately FRF 41,500 (approximately $6,658 based on exchange rates at the time of closing) and assumed debt of approximately FRF 51,000 (approximately $8,182 based on exchange rates at the date of closing). Like-Kind Exchange of Properties On September 3, 1999, Wyndham sold certain land located in San Mateo, California, to the Susan W. Lakatos Separate Property Trust Agreement, the Rot Family Trust, and Ernest Weil Family Trust U.T.A. for a gross purchase price of $3,500, and recognized a gain of approximately $985. These funds were placed in a restricted trust account in order to facilitate a tax-deferred, like-kind exchange through the acquisition of a suitable hotel property. 3. INTERSTATE'S THIRD-PARTY HOTEL MANAGEMENT BUSINESS On May 27, 1998, Old Wyndham and Interstate Hotels Company ("Old Interstate") entered into a settlement agreement, as amended, with Marriott International, Inc. ("Marriott"), which addressed certain claims asserted by Marriott in connection with Old Wyndham's then proposed merger with Old Interstate. The settlement agreement provided for the dismissal of litigation brought by Marriott, and allowed Old Wyndham's merger with Old Interstate to close. In addition to dismissal of the Marriott litigation, the settlement agreement provides for the re-branding of ten Marriott hotels under the Wyndham name, the assumption by Marriott of the management of ten Marriott hotels formerly managed by Old Interstate for the remaining term of the Marriott franchise agreement, and the spin-off by Wyndham of the third-party management business. 8 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited) Effective June 18, 1999, Old Wyndham distributed approximately 92% of Interstate Hotels Corporation ("Interstate") in the form of a dividend to shareholders. Shareholders of record on June 7, 1999 received one share of newly issued Interstate stock for every thirty paired shares owned of Patriot and Old Wyndham. The remaining 8% is owned equally by Wyndham and Marriott. As a result of the spin-off, Wyndham now also owns an approximate 55% non- controlling interest in the subsidiary of Interstate which now operates the existing third-party management business that Wyndham acquired from Old Interstate. As of September 30, 1999, Wyndham's investment in the entity was $52,837 and is reflected in investment in unconsolidated subsidiaries. 4. RESTRUCTURING AND NEW FINANCING TRANSACTIONS Effective June 30, 1999, Wyndham entered into a series of transactions as follows; 1) a $1 billion equity investment, 2) an organizational restructuring, 3) closing of a $2,450,000 credit facility, and 4) closing of new mortgage notes totaling $581,000, as follows: Equity investment Effective June 30, 1999, Wyndham completed a $1 billion equity investment with a group of investors. Pursuant to the terms of this investment, Wyndham issued 9.55 million shares of series B convertible preferred stock in exchange for gross proceeds of $955,000. On July 1, 1999, the remaining $45,000 was funded through the transfer of one of the investor's loan receivable from PAH Realty Company, LLC which is secured by a mortgage on the Battery March Hotel, to Wyndham International Inc. for the purchase of 450,000 shares of series B convertible preferred stock. Wyndham has incurred approximately $77,479 in costs attributable to the equity investment. This series B convertible preferred stock has the following terms, among others: . dividends payable quarterly, on a cumulative basis, at a rate of 9.75% per year; . for the first six years, the dividends are structured to ensure an aggregate fixed cash dividend payment of $29,250 per year, so long as there is no redemption or conversion of the investors' series B convertible preferred stock; therefore, for that period, dividends are payable partly in cash and partly in additional shares of series B convertible preferred stock, with the cash component initially equal to 30% for the first dividend and declining over the period to approximately 19.8% for the final dividend in year six; . for the next four years, dividends are payable in cash or additional shares of series B convertible preferred stock as determined by the Board of Directors; and, after year 10, dividends are payable solely in cash; . if any dividends are paid on the Wyndham common stock, additional dividends will be paid in the amount that would have been paid on the shares of Wyndham common stock into which the series B preferred stock is then convertible; . if a change in control or a liquidation of Wyndham occurs within six years following the investment, any dividends remaining for the six years will be accelerated and paid; . not redeemable by Wyndham for six years, except that up to $300 million of the series B convertible preferred stock may be redeemed during the 170 day period following the closing of the investment; . voting with the Wyndham common stock on an as-converted basis on matters submitted to the common stockholders and voting as a separate class on specified matters, with special rules applying to the election of directors; and . convertible, at the holder's option, into a number of shares of Wyndham common stock equal to $100.00 divided by the conversion price, initially equal to $8.59 but subject to potential downward adjustments. 9 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited) The investors will also have preemptive rights for the first five years following their investment as long as they own more than 15% of the Wyndham common stock. As noted above, for a period of 170 days following the completion of the investment, Wyndham may redeem up to $300 million of the series B convertible preferred stock at a redemption price of $102.00 per share (102% of the stated amount) plus all accrued dividends. In connection with the settlement of the class action litigation related to its restructuring discussed below, Wyndham intends to fund this redemption with the proceeds of its offering to its stockholders and the limited partners in the Operating Partnerships of rights to purchase up to three million shares of its series A convertible preferred stock, which generally has the same economic terms as the series B convertible preferred stock, but has no voting rights, except as required by law and except for a limited right to elect two directors if dividends are in arrears for six quarterly periods. The record date for the rights offering is September 30, 1999. The registration statement for the rights offering was declared effective on November 8, 1999, and the rights offering is scheduled to expire on December 8, 1999. Organizational restructuring As a condition of this investment, Old Wyndham was required to terminate the pairing agreement with Patriot and restructure the existing organization. As such, a subsidiary of Old Wyndham was merged with and into Patriot and Patriot became a wholly-owned subsidiary of Wyndham. Patriot's status as a real estate investment trust terminated effective January 1, 1999, and Patriot became a taxable corporation as of that date. Wyndham recorded a one-time charge of $675,000 to establish a deferred tax liability that resulted from Patriot's change in tax status from a REIT to a C corporation, as required by Statement of Financial Accounting Standard No. 109. This charge is included in income tax expense in the accompanying 1999 condensed consolidated statement of operations. Wyndham also recorded a restructuring charge of $189,288 as a result of the termination of the paired share structure, and management's decision to exit out of certain activities resulting in the write-down of certain non-strategic assets, and costs to sever certain employees. Wyndham recorded a charge of approximately $83,094 for the write off of the unamortized intangible asset associated with the paired share structure which was abandoned June 30, 1999. In addition, Wyndham incurred approximately $4,675, in severance and employee related costs for seven employees in the New York corporate office and two employees in the Dallas corporate office. The New York office was closed on June 30, 1999 and its employees were terminated at that time. Wyndham paid $4,175 in the form of cash and forgiveness of debt; the remaining unpaid portion of $500 has been included in accrued liabilities at September 30, 1999. Wyndham has also paid $573 in professional fees associated with the restructuring. Wyndham recorded a charge of $82,957 for the write-down of assets to estimated fair value, including goodwill of $28,394 as a result of management's strategy to exit from the European market for their non-branded assets which will be sold. In addition, Wyndham recorded costs of $7,226 associated with staffing reductions and other exit costs necessary to reduce Wyndham's infrastructure in Arcadian International, Wyndham's management division in Europe. Included in accounts payable and accrued expenses at September 30, 1999 was $3,345 related to severance costs to terminate 67 employees in the European office and $2,783 related to other exit costs for those actions, primarily lease cancellations, that have not yet been completed as of September 30, 1999. Wyndham expects these actions to be completed by December 31, 1999. 10 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited) In addition, a charge of $8,263 for the tradename intangibles attributable to the Carefree brand was recorded, as management has decided that none of the owned or managed assets will carry the Carefree brand now or in the future. On August 11, 1999, Wyndham announced its plan to realign its luxury division, in its continuing efforts to streamline its organization. As a result, the Phoenix division office was closed on September 10, 1999. Wyndham recorded costs of $2,006 associated with severance payments for staffing reductions of 19 employees, and $494 for other exit costs. As of September 30, 1999, included in accounts payable and accrued expenses was $2,251 related to severance costs and other exit costs that have not yet been completed as of September 30, 1999. Wyndham expects these actions to be completed by March 31, 2000. Also as a part of the restructuring, the preferred stockholders of Old Wyndham were offered an opportunity to exchange their preferred stock for Wyndham class A common stock. Each of the 1,781,173 shares of Old Wyndham series A preferred stock and each of the 1,781,181 shares of Old Wyndham series B preferred stock were exchanged for one share of Wyndham class A common stock. Pursuant to the merger of a wholly-owned subsidiary of Old Wyndham with Patriot, each outstanding paired share and share of Patriot series A preferred stock was converted into a single share of Wyndham class A common stock, and each outstanding share of Patriot series B preferred stock was converted into $25 per share and $1.61 of accrued dividends, or an aggregate of $14,862 in cash. Additionally, the third party limited partners in both the Patriot Partnership, and the Wyndham Partnership were offered an opportunity to exchange their limited partnership interests for Wyndham class A common stock. As a result, an additional 15,097,354 shares of Wyndham class A common stock were issued in exchange for limited partnership units in the Operating Partnerships. The effect of the exchange of certain limited partners interests for Wyndham class A common stock, resulted in an adjustment to the basis of certain assets in accordance with Emerging Issues Task Force ("EITF") 95-7. This adjustment is reflected in the accompanying balance sheet as a reduction in the basis of Wyndham's investment in real estate and related improvements of $37,150, investment in unconsolidated subsidiaries of $2,562 and goodwill and intangibles of $78,433. Generally, the assets of Old Wyndham, Patriot and the Operating Partnerships remained in the entity that owned them prior to restructuring, except that the non-voting stock of the non-controlled subsidiaries was transferred from the Patriot Partnership to Patriot. New credit facility Concurrent with the closing of the $1 billion equity investment described above, Wyndham closed on a new $2,450,000 credit facility which consists of: a $1.3 billion term loan with a seven year term, a $500,000 revolving credit facility with a five year term, and a $650,000 increasing rate loan facility with a five year term. Proceeds, net of closing costs and fees of approximately $41,125 from the term loan and the revolving credit facility, and proceeds, net of closing costs and fees of approximately $17,875 from the increasing rate loan facility, were used to retire existing indebtedness. At September 30, 1999, $100,000 was drawn on the new revolving credit facility. Interest rates are based upon LIBOR plus spreads varying from 2.75% to 3.50% per annum for the term loan, and 1.25% to 2.75% per annum for the revolving credit facility, based both on Wyndham's leverage ratio, as defined, and whether any increasing rate loans are outstanding. If any of the increasing rate loan facility remains outstanding, the applicable margins shall be increased by 0.25%. The term loan, and the revolving credit facility are guaranteed by the domestic subsidiaries of Wyndham, and are secured by pledges of equity interests 11 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited) held by Wyndham and its subsidiaries. Wyndham's ability to borrow under its revolving credit facility is subject to Wyndham's compliance with a number of customary financial and other covenants, including total leverage and interest coverage ratios. Interest rates for the increasing rate loans are based on LIBOR rates (less statutory reserves), plus 3.50% through September 30, 1999, and increasing 0.50% every three months, with a cap of LIBOR plus 4.75%. The lender under the increasing rate loans receives the benefit of the same guarantees and pledges of security provided under the new term loan, and revolving credit facility. New mortgage debt Effective June 30, 1999, Wyndham also closed on a $346 million mortgage loan with Bear, Stearns Funding, Inc., which is secured by twenty-five properties. The loan matures on July 1, 2004 and bears interest at the LIBOR rate plus 3.25% per annum. Proceeds from the mortgage debt were used to retire existing mortgage indebtedness. Additionally, effective June 30, 1999, Wyndham closed on a $235 million mortgage loan with Lehman Brothers Holdings Inc. which is secured by ten properties. The mortgage loan has a three-year term, with a one year extension option, and bears interest at the LIBOR rate plus 3.50% per annum, plus an additional 1.75% on the principal amount payable at maturity. Proceeds from this mortgage loan were used to retire existing mortgage indebtedness. At September 30, 1999, the LIBOR rate was 5.4% and averaged 5.1% during the nine month period ended September 30, 1999. 5. CREDIT FACILITY, TERM LOANS, MORTGAGES AND OTHER NOTES Credit facility and term loans Prior to June 30, 1999, Wyndham's credit facilities were led by Chase Manhattan Bank, Chase Securities, Inc. and Paine Webber Real Estate Securities, Inc. and included a $900,000 revolving credit facility (the "Credit Facility") and a series of term loans in the aggregate amount of up to $1,800,000 (the "Term Loans"). Proceeds from the Credit Facility were used to fund certain of Wyndham's mergers, as well as to refinance certain outstanding indebtedness. Interest rates were based on Wyndham's leverage ratio and varied from 1.5% to 3.0% over LIBOR. The Term Loans and the Credit Facility, along with accrued interest and fees, were repaid in full on June 30, 1999 with proceeds from the new credit facility and the $1 billion equity investment. As a result of this repayment, Wyndham incurred an extraordinary loss on early extinguishment of debt of $9,838, net of minority interest and income tax effects. Paine Webber Mortgage Financing Effective June 30, 1999, a loan with an affiliate of Paine Webber Real Estate Securities, Inc. ("Paine Webber Real Estate") for $103,000, including accrued interest, was repaid with proceeds from the new financings described above. 12 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited) Effective June 30, 1999, Wyndham repaid two loans with Paine Webber Real Estate of $35,000 and $160,000 which were entered into in connection with the acquisition of the Wyndham Emerald Plaza Hotel located in San Diego California and the Arcadian acquisition, respectively, with proceeds from the new financings described above. Other mortgage debt During 1999, Beacon Capital Partners, L.P. ("Beacon") loaned $45,000 to Wyndham. The loan, which bore interest at LIBOR plus 2.5% was to mature on July 1, 1999. The loan was secured by a first mortgage on the Wyndham Boston hotel, a property under construction in Boston, Massachusetts. Wyndham paid Beacon a financing fee of 2.5% of the loan principal in May 1999. On July 1, 1999 the loan was transferred from Beacon to Wyndham International, Inc. for the purchase of 450,000 shares of Series B convertible preferred stock. In connection with the acquisition of Billerica, Wyndham assumed a construction note totaling $16,411. The loan bears interest at 9.5%, and matures May 17, 2000. In connection with the acquisition of Le Manoir de Gressey, Wyndham assumed mortgage debt of approximately $8,282; the loan bears interest at the French interbank base rate plus 1.5% and matures April 30, 2007. El Conquistador and Condado Hotel & Casino Financing On June 25, 1999, Wyndham entered into an agreement with Citicorp Real Estate, Inc. to extend $90,000 of mortgage debt related to the El Conquistador Partnership, L.P., which was set to mature on June 30, 1999. Per the terms of the extension agreement, the interest rate was amended such that the loan bears interest at the LIBOR rate plus 2.75% through December 31, 1999 and then LIBOR plus 3.25% through maturity on June 30, 2000. Additionally, on June 29, 1999, Wyndham refinanced $55,000 of debt on the Condado Hotel & Casino with The Bank of Nova Scotia. Principal payments on the loan are due in monthly amounts of $306 beginning on July 22, 1999 through maturity on July 22, 2004 at which time a balloon payment of $36,972 is due. The interest rate on the first $50,000 is based upon LIBOR spreads varying from 2.50% to 3.25% per annum, and on amounts over $50,000 is based upon LIBOR spreads varying from 3.00% to 3.75% per annum, based on a ratio of earnings to total debt service, as defined. Royal Bank of Scotland and Coutts & Company On August 12, 1999, Wyndham renegotiated its debt obligations to both the Royal Bank of Scotland and Coutts & Company. The debt with the Royal Bank of Scotland of approximately $63,870 at September 30, 1999 bears interest at the UK Base Rate plus 1.3% and matures August 2000 with an option to extend for an additional six months. The debt is secured by first lien mortgages encumbering 11 hotels of Arcadia. The agreement provides that 75% of the gross sale proceeds from each of the first eight hotels that are sold should be used to repay the outstanding obligation. To the extent that any amount of the debt remains outstanding, then 100% of the gross sales proceeds of the remaining three hotels should be applied to the outstanding balance. The debt with the Coutts & Company of approximately $32,256 at September 30, 1999 bears interest at Sterling Libor plus 2.5% and matures December 31, 2003. The debt is secured by first lien mortgages encumbering 5 Malmaison hotels. 13 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited) 6. FINANCIAL DERIVATIVES Interest rate swaps and caps Wyndham enters into interest rate swap and cap agreements to modify the interest characteristics of its outstanding debt. These agreements involve the exchange of amounts based on a variable interest rate for amounts based on fixed interest rates over the life of the agreement without an exchange of the notional amount upon which the payments are based. The differential to be paid or received as interest rates change is accrued and recognized as an adjustment of interest expense related to the debt using a method which approximates the effective interest method (the accrual accounting method). The related amount payable to or receivable from counterparties is included in accrued expenses or other assets. Wyndham also enters into interest rate cap agreements that are designed to limit its exposure to increasing interest rates and are designated as hedges of its outstanding debt. An interest rate cap entitles Wyndham to receive a payment from the counterparty equal to the excess, if any, of the hypothetical interest expense (strike price) on a specified notional amount at a current market interest rate over an amount specified in the agreement. The only amount Wyndham is obligated to pay the counterparty is an initial premium. The cost of the agreements (the initial premium) is included in other assets and amortized to interest expense ratably during the life of the agreement. As of September 30, 1999, Wyndham had entered into three additional interest rate swap arrangements. The arrangements swap floating rate LIBOR-based interest rates for a fixed rate interest amount as a hedge against $50,987 of the outstanding balance on specific property related debt, and $400,000 of other indebtedness. The interest rate swap fixes the LIBOR portion of the debt interest rate at 5.31% per annum through January 2000 ($19,987), 5.42% per annum through March 2001 ($31,000) and 5.91% per annum through February 2000 (400,000). At September 30, 1999, Wyndham has various interest rate swap arrangements as a hedge against $1,272.1 of the outstanding balance of certain floating rate debt. Additionally during 1999, Wyndham entered into two interest rate cap arrangements as follows; an interest rate cap that limits LIBOR to 7% on up to $1,500,000 of indebtedness through April 2000, and an interest rate cap that limits LIBOR to 6.75% on up to $19,475 of indebtedness through March 2001. The fair value of interest rate swap and cap agreements and changes in the fair value as a result of changes in market interest rates are not recognized in the financial statements. The unrealized gain on these derivative instruments was approximately $5,699 at September 30, 1999, which represents the net proceeds Wyndham would receive if the derivatives were sold. 7. COMPREHENSIVE LOSS SFAS No. 130, "Reporting Comprehensive Income", establishes standards for reporting and displaying comprehensive loss and its components. Wyndham adopted SFAS No. 130 beginning with their interim financial statements for the first quarter of 1998. Total comprehensive loss for the periods is as follows:
Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------- 1999 1998 1999 1998 -------- -------- --------- -------- Net loss.......................... $(44,565) $(59,415) $(921,223) $(67,257) Unrealized (loss) gain on securities available for sale.... (676) (767) 185 (1,388) Unrealized foreign exchange gain (loss)........................... 9,935 4,313 (2,455) 4,323 -------- -------- --------- -------- Total comprehensive loss........ $(35,306) $(55,869) $(923,493) $(64,322) ======== ======== ========= ========
14 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited) 8. COMPUTATION OF EARNINGS PER SHARE Earnings per share have been computed as follows:
Three Months Ended Three Months Ended September 30, 1999 September 30, 1998 -------------------- -------------------- Basic Diluted(1) Basic Diluted(1) -------- ---------- -------- ---------- Loss before extraordinary item... $(44,565) $(44,565) $(58,158) $ (58,158) Adjustment for equity forwards(2)..................... -- -- -- (95,063) Preferred stock dividends........ (24,375) (24,375) (2,695) (2,695) -------- -------- -------- --------- Loss attributable to common shareholders before extraordinary item.............. (68,940) (68,940) (60,853) (155,916) Extraordinary loss............... -- -- (1,257) (1,257) -------- -------- -------- --------- Net loss attributable to common shareholders.................... $(68,940) $(68,940) $(62,110) $(157,173) ======== ======== ======== ========= Weighted average number of common shares outstanding.............. 166,954 166,954 154,510 154,510 ======== ======== ======== ========= Loss per share: Loss before extraordinary item.......................... $ (0.41) $ (0.41) $ (0.39) $ (1.01) Extraordinary loss............. -- -- (0.01) (0.01) -------- -------- -------- --------- Net loss..................... $ (0.41) $ (0.41) $ (0.40) $ (1.02) ======== ======== ======== =========
- -------- (1) For the three months ended September 30, 1999, the dilutive effect of unvested stock grants of 733, the option to purchase common stock of 19 and preferred stock of 116,414 were not included in the computation of diluted earnings per share because they are anti-dilutive. For the three months ended September 30, 1998, the dilutive effect of unvested stock grants of 798, the option to purchase common stock of 494, preferred stock of 8,423 and common stock of 2,981 in connection with the forward equity contracts were not included in the computation of diluted earnings per share because they were anti-dilutive. (2) The adjustment relates to the mark-to-market and yield adjustment for the forward equity contracts which could be settled in cash or stock, at Wyndham's option. 15 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited)
Nine Months Ended Nine Months Ended September 30, 1999 September 30, 1998 --------------------- --------------------- Basic Diluted(1) Basic Diluted(1) --------- ---------- --------- ---------- Loss before extraordinary item......................... $(911,385) $(911,385) $ (35,440) $ (35,440) Adjustment for equity forwards (2).......................... (19,372) (39,322) -- (122,431) Preferred stock dividends..... (25,276) (25,276) (4,250) (4,250) --------- --------- --------- --------- Loss attributable to common shareholders before extraordinary item........... (956,033) (975,983) (39,690) (162,121) Extraordinary loss............ (9,838) (9,838) (31,817) (31,817) --------- --------- --------- --------- Net loss attributable to common shareholders.......... $(965,871) $(985,821) $ (71,507) $(193,938) ========= ========= ========= ========= Weighted average number of common shares outstanding.... 159,254 159,254 132,450 132,450 ========= ========= ========= ========= Loss per share: Loss before extraordinary item....................... $ (6.00) $ (6.13) $ (0.30) $ (1.22) Extraordinary loss.......... (0.06) (0.06) (0.24) (0.24) ========= ========= ========= ========= Net loss.................. $ (6.06) $ (6.19) $ (0.54) $ (1.46) ========= ========= ========= =========
- -------- (1) For the nine months ended September 30, 1999, the dilutive effect of unvested stock grants of 795, the option to purchase common stock of 32 and preferred stock of 44,785 were not included in the computation of diluted earnings per shares because they are anti-dilutive. For the nine months ended September 30, 1998, the dilutive effect of unvested stock grants of 837, the option to purchase common stock of 1,175, preferred stock of 6,003 and common stock of 1,551 issued in connection with forward equity were not included in the computation of diluted earnings per share because they are anti-dilutive. (2) The adjustment relates to the mark-to-market and yield adjustment for the forward equity contracts which could be settled in cash or stock, at Wyndham's option. 9. COMMITMENTS AND CONTINGENCIES Forward equity contracts Wyndham's aggregate obligation under the forward equity transactions was approximately $335.8 million at June 30, 1999. Effective June 30, 1999, Wyndham settled in full all of the forward equity transactions in cash, with part of the proceeds of the $1 billion equity investment. The 100.7 million shares owned or held by the counterparties were retired effective June 30, 1999. Contingencies On June 29, 1992 an action for trademark infringement was filed in the New York Supreme County of New York, Index No. 17474/92 titled Wyndham Hotel Company, John Mados, and Suzanne Mados et al v. Wyndham Hotel Company, Ltd. It is based upon the Madoses' alleged use of the mark WYNDHAM in connection with the Wyndham Hotel located in Manhattan, New York City, and operated by the Madoses since 1966 pursuant to a lease agreement entered into by the Madoses on June 1, 1957. The case was tried in May 1996, and an order and partial judgement was entered in March 1998. The order enjoins us from using the name and mark "Wyndham" in connection with the advertising, promoting, managing or operating a hotel in Manhattan, New York City, and places restrictions on Wyndham's use of the name and mark "Wyndham" in all other areas of New York outside 16 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited) of Manhattan. In November 1998, an order was issued clarifying the original order and a final judgment was entered. In December 1998, Wyndham appealed that judgment to the New York Supreme Court, Appellate Division, First Department. In January 1999, Wyndham moved for a stay of the injunction pending appeal which motion was granted by the Appellate Division, First Department on February 4, 1999. On May 18, 1999 the Appellate Division, First Department rendered a decision and order affirming the final judgment. On May 24, 1999, Wyndham filed a motion for permission to appeal that decision to the Court of Appeals of the State of New York. In July 1999, Wyndham received notice that the Court of Appeals of the State of New York would not hear the appeal. Patriot and Old Wyndham have received two letters dated November 11, 1998 and December 2, 1998 (the "Letters") from the counsel for the Koffman family and its affiliates (collectively, "Koffman") in connection with a Registration Rights Agreement entered into as of March 31, 1998 (the "Agreement") among Patriot, Old Wyndham and the Holders as defined therein, which such Holders include Koffman. Counsel has asserted in the Letters that, in connection with Patriot's and Old Wyndham's exercise of their "black-out" rights under the Agreement, on October 8, 1998 Patriot and Old Wyndham are in breach of their obligations to Koffman under the Agreement. Counsel has stated in the Letters that Koffman will seek relief from Patriot and Old Wyndham for any losses that Koffman may have sustained in connection with Patriot's and Old Wyndham's alleged breach of the Agreement and also have implied that Koffman may file against Patriot and Old Wyndham unspecified claims allegedly arising under the federal securities laws. If Patriot and Old Wyndham are sued, they plan to vigorously defend this lawsuit. Patriot and Old Wyndham have disclosed various matters relating to Patriot and Old Wyndham in their Form 8-K filed with the Securities and Exchange Commission on November 9, 1998 including, without limitation, an assertion by UBS AG, London Branch ("UBS") that Patriot and Old Wyndham are in default under the terms of a forward contract by and among Patriot, Old Wyndham and UBS. Patriot and Old Wyndham also have disclosed various matters in their Joint Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 26, 1999, and in registration statements on Form S-3 (filed on April 28, 1999) and Form S-4 (filed on April 14, 1999). On January 12, 1999, a putative class action lawsuit was filed on behalf of the shareholders of Patriot and Old Wyndham in the Delaware Chancery Court. This lawsuit, captioned Charles Fraschilla v. Paul A. Nussbaum, et al., No. 16895-NC, names as defendants Patriot, the then Patriot directors ("Patriot Directors"), and Apollo Real Estate Advisors, L.P., Apollo Management, L.P., The Thomas H. Lee Company, Beacon Capital Partners, Inc. and Rosen Consulting Group (collectively, the "Investors"). This lawsuit alleges, among other things, that the Patriot Directors breached their fiduciary duties to Patriot's then shareholders with respect to Patriot's financial condition and by "effectively selling control" of Patriot to the Investors for inadequate consideration and without having adequately considered or explored all other alternatives to the sale or having taken steps to maximize shareholder value; and the Investors aided and abetted the Patriot Directors in their purported breaches of fiduciary duty. In the complaint, the plaintiff seeks an injunction preventing the consummation of the deal with the Investors (which Investment now has been consummated) and monetary damages. On January 19, 1999, three additional and similar putative class action lawsuits were filed in the same court by different purported class representatives: Sybil R. Meisel and Steven Langsam, Trustees v. Paul A. Nussbaum, et al., No 16905-NC; Crandon Capital Partners v. Paul A. Nussbaum, et al., No. 16906-NC; and Robert A. Staub v. Paul A. Nussbaum, et al., No. 16907-NC. The four suits since have been consolidated under the Fraschilla caption. 17 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited) The parties have negotiated and entered into a stipulation of settlement to settle these four putative consolidated class action lawsuits, dated September 17, 1999. The stipulation of settlement sets forth the principal bases for the settlement, which include, among other things, the modification of Wyndham's obligations to make the optional $300 million rights offering (the "Rights Offering") specified in Section 6.13 of the Securities Purchase Agreement, as follows: (a) Wyndham shall make the Rights Offering; (b) the Rights Offering shall be made no earlier than 60 days after the Closing Date, as defined in the Securities Purchase Agreement (the "Closing Date"), and shall be held open for a period of not less than 30 days, and Wyndham shall use its good faith efforts to commence the Rights Offering no later than 120 days after the Closing Date; provided, however, that Wyndham will not be required to make the Rights Offering if: (i) the SEC does not declare effective any registration statement with regard to securities of Wyndham to be offered in the Rights Offering; (ii) there is a pending court order, motion, legal proceeding or other action to enjoin, prevent or delay the Rights Offering; or (iii) the Rights Offering cannot be completed, despite Wyndham's good faith efforts, within 170 days of the Closing Date. The stipulation of settlement has been approved by order of the Delaware Chancery Court dated November 1, 1999. In the court's order, the Court certified, for purposes of settlement, a non-opt out, binding class of all persons and entities (exclusive of defendants and their affiliates) who owned shares of Wyndham common stock beneficially or of record, as of September 30, 1999 and/or sold shares of Patriot or Wyndham common stock during the period from January 12, 1999 to and including September 30, 1999 (the "Class"). The Court approved the settlement, including dismissing with prejudice all claims of the plaintiffs and the Class against the Defendants and others and approved an award of attorneys' fees to counsel for the plaintiffs in the amount of $1.125 million. The Court order has not yet become final. On February 3, 1999, McNeill Investment Company, Inc. filed a lawsuit against Patriot in the United States District Court for the Western District of Pennsylvania. In the lawsuit, captioned McNeill Investment Company, Inc. v. Patriot American Hospitality, Inc., No 99-165, the plaintiff alleges that Patriot breached its obligations under a registration rights agreement that Patriot became obligated under through its merger transaction with Interstate Hotels Corporation. On March 26, 1999, Patriot filed an answer to the complaint in which it denied all liability. Wyndham plans to vigorously defend this lawsuit. On May 7, 1999, a putative class action lawsuit was filed in the United States District Court for the Northern District of California on behalf of former shareholders of California Jockey Club and Bay Meadows Operating Company (collectively, "Bay Meadows") who subsequently became shareholders of Patriot, Patriot American Hospitality Operating Company and Wyndham as a result of the merger (the "Merger") of the above companies on or about July 1, 1997 (the "Class"). This lawsuit, captioned Johnson, et al. v. Patriot American Hospitality, Inc. et al., C-99-2153-SI, names as defendants Patriot American Hospitality, Inc., Wyndham International, Inc., PAH GP, Inc. PAH LP, Inc., Patriot American Hospitality Partnership, L.P., Wyndham International Operating Partnership, L.P. and PaineWebber Group, Inc. This action was commenced on behalf of all former holders of Bay Meadows stock during a class period from June 2, 1997 to the date of filing (May 7, 1999). This action asserts securities fraud claims and alleges that the purported class members wrongfully were induced to tender their Bay Meadows shares as part of the Patriot/Bay Meadows merger based on a fraudulent prospectus. This action further alleges that defendants continued to defraud shareholders about their intentions to acquire numerous hotels and saddle Wyndham with massive debt during the class period. Three other actions against the same defendants subsequently were filed in the Northern District of California: (i) Ansell v. Patriot American Hospitality, Inc., et al., No. C-99-2239 (filed May 14, 1999), (ii) Sola v. Paine Webber Group, Inc., et al., No. C-99-2770 (filed June 11, 1999), and (iii) Gunderson v. Patriot American Hospitality, Inc., et al., No. C 99-3040 (filed June 23, 1999). Another action with substantially identical allegations, Susnow v. Patriot 18 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited) American Hospitality, Inc., et al., No. 3-99-CV1354-T (filed June 15, 1999), also subsequently was filed in the Northern District of Texas. By order of the Judicial Panel on Multi-district litigation, the California actions have been consolidated with the Susnow action and certain other actions listed below for consolidated pretrial purposes in the Northern District of California. To date, none of the defendants have been required to answer, move or otherwise respond to the complaints and no discovery has been taken. Wyndham plans to vigorously defend those lawsuits. On or about June 22, 1999, a putative class action lawsuit captioned Levitch v. Patriot American Hospitality, Inc., et al., No. 3-99-CV1416-D, was filed in the Northern District of Texas against Patriot, Wyndham, James D. Carreker and Paul A. Nussbaum. This action asserts securities fraud claims and alleges that, during the period from January 5, 1998 to December 17, 1998, the defendants defrauded shareholders by issuing false statements about Wyndham. The complaint was filed on behalf of all shareholders who purchased Patriot American and Wyndham stock during that period. Two other actions, Gallagher v. Patriot American Hospitality, Inc., et al., No. 3-99-CV1429-L, filed on June 23, 1999, and Szekely v. Patriot American Hospitality, Inc., 3-99-CV1866-D filed August 23, 1999, allege substantially the same allegations and claims as mentioned above. By order of the Judicial Panel on Multi-district litigation, these actions have been consolidated with the Susnow action for consolidated pretrial purposes in the Northern District of California. To date, none of the defendants have been required to answer, move or otherwise respond to the complaints and no discovery has been taken. Wyndham plans to vigorously defend those lawsuits. On May 18, 1999, Patriot received correspondence from Deborah Szekely ("Szekely"), one of the sellers of Golden Door Spa, which Patriot purchased on May 28, 1998. In that correspondence, Szekely threatened to file a complaint sounding in securities fraud based upon allegedly misleading financial information provided to Szekely by Patriot. On May 21, 1999, Patriot received correspondence from counsel for Szekely stating that Szekely would prosecute a civil action against Patriot and related entities. Counsel enclosed a draft Tolling Agreement with that letter. Patriot and potential litigants entered into a Tolling Agreement on May 26, 1999, which extended the period for the sellers to file a complaint to June 29, 1999. The Tolling Agreement subsequently was extended to July 15, 1999 and then to August 2, 1999. Counsel has provided Patriot with a draft complaint which purports to assert claims under California state law for securities fraud, fraud in the inducement, common law fraud, breach of fiduciary duty and deceit. To the best of Patriot's knowledge, Szekely has not yet commenced that action but instead has commenced the action listed above. If a complaint is filed and served on Patriot, Patriot plans to vigorously defend this lawsuit. Patriot, a subsidiary of Patriot (the "Subsidiary"), which is the general partner of a partnership (the "Partnership") and an affiliate of the Subsidiary, which is a limited partner of the Partnership, are parties to a dispute with another limited partner of the Partnership relating to a proposed hotel development in Jacksonville, Florida. The case is captioned C&M Investors Limited v. Patriot American Hospitality, Inc. et al., originally filed in the Florida Circuit Court, Fourth Judicial Circuit, in and for Duval County, Florida, but later removed and now pending in the United States District Court, Middle District of Florida, Jacksonville Division, Civil Action No. 98-1236-Civ. J 20B. Wyndham plans to vigorously defend this lawsuit. On September 17, 1999, Starwood Hotels & Resorts Worldwide Inc. ("Starwood") filed a lawsuit against Fred J. Kleisner, Richard Mahoney and Wyndham in the United States District Court for the Southern District of New York. In the lawsuit, captioned Starwood Hotels & Resorts Worldwide Inc. v. Fred J. Kleisner et al, No. 99 Civ. 9811. The plaintiff alleged that Wyndham tortiously interfered with alleged employment contracts between Starwood and Kleisner and Mahoney, that the defendants misapproriated trade secrets belonging to Starwood, that the defendants tortiously interfered with Starwood's prospective business relationships and that the defendants are unfairly competing with Starwood. The complaint sought injunctive relief and other damages. 19 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited) On November 12, 1999, Starwood and Wyndham, Kleisner and Mahoney (the "Wyndham Defendants") entered into a Settlement Agreement and Mutual Release (the "Settlement Agreement") under the terms of which all claims against the Wyndham Defendants were dismissed with prejudice and the Wyndham Defendants paid no damages. Under the Settlement Agreement, Wyndham agreed to restrictions on its ability to hire and solicit for employment certain Starwood employees until July 2000. 10. RELATED PARTY TRANSACTIONS Consulting agreements On February 26, 1999, Wyndham and Paul A. Nussbaum entered into a Separation Agreement (the "Separation Agreement") whereby Mr. Nussbaum resigned his position as Chairman of the Board of Directors and Chief Executive Officer of Patriot. Pursuant to the Separation Agreement, Mr. Nussbaum will remain as a Director of Wyndham. In accordance with terms of the Separation Agreement, Wyndham shall pay severance of $3,200 reduced by any interest payments made by Wyndham on the NationsBank Loan through June 30, 1999. On August 13, 1999, in accordance with the terms of the separation agreement, Wyndham repaid the outstanding balance of the NationsBank Loan, and executed a promissory note and security agreement ("Promissory Note") with Mr. Nussbaum in an amount of $7,846. The Promissory Note is secured by 449,818 shares of common stock ("Collateral Shares") and any and all distributions and dividends which may from time to time be paid or payable on the Collateral Shares. The Promissory Note bears interest at 5.5% per annum compounded annually, and matures on August 13, 2005. Additionally, Mr. Nussbaum's outstanding unvested options to purchase Wyndham shares vested and will remain fully exercisable for the period of their respective terms. Mr. Nussbaum elected to exchange his options on a Black Scholes neutral basis for new options with an exercise price equal to the fair market value of a share on the election date. On June 1, 1999, Mr. Nussbaum exchanged 3,078,406 options at varying prices from $11.18 to $33.58 for 1,154,448 options at $5.1875. Mr. Nussbaum will also receive 250,000 shares equally over a three year period, of which 83,334 have vested as of September 30, 1999. Additionally any restrictions were lifted from existing shares held by Mr. Nussbaum. As a condition to receiving the second and third installments of the shares, Mr. Nussbaum has agreed to provide non-exclusive consulting services to Wyndham for a period of two years following the resignation date. Additionally, Mr. Nussbaum will receive other amounts as provided for in the Separation Agreement. Other related party transactions In 1999, Wyndham amended its management contract for the Wyndham Anatole Hotel to provide that the owners of the hotel may terminate the management contract following the first annual meeting of Wyndham stockholders after the completion of the $1 billion equity investment if Mr. Nussbaum continues on the Board of Directors of Wyndham. Mr. Nussbaum has delivered a letter to Wyndham stating that he would not stand for re-election to the Board of Directors if it would result in a termination of the management contract. Additionally, the owners of the Wyndham Anatole Hotel may terminate the management contract if James D. Carreker ceases to be an executive officer of Wyndham. On April 30, 1999, Wyndham's option to purchase certain interests in Kinetic Group Limited Partnership, which provides management information services to Wyndham, expired without being exercised. Kinetic Group Limited Partnership is owned 50% by Trammell Crow Company and 50% by an entity owned by Crow family members and certain of Wyndham's senior executive officers. In connection with the merger with Gencom Interests, Inc., Mr. Karim Alibhai, an independent director, received 400,883 shares of Wyndham Class A common stock. These shares were issued in consideration of Mr. Alibhai's ownership interests in Gencom Interests, Inc. and valued at approximately $1,813 on the date of merger. 20 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited) 11. DIVIDENDS On May 4, 1998, Patriot declared a dividend of $0.298 per share for the first quarter of 1998. The dividend was paid on May 29, 1998 to shareholders of record on May 20, 1998. On January 25, 1999, Patriot paid a stock dividend of $.44 per share of common stock for the fourth quarter of 1998 to shareholders of record on December 30, 1998. Earnings per common share, weighted average shares outstanding and all stock option activity have been restated to reflect the stock dividend. On September 30, 1999, Wyndham paid a 9.75% dividend on the series B convertible preferred stock. The dividend was paid partly in cash, and partly in additional shares of series B preferred stock. Wyndham paid a total of $7,315 in cash, representing approximately 30% of the dividend and issued 170,599 shares of series B convertible preferred shares representing approximately 70% of the dividend. 12. SEGMENT REPORTING Wyndham classifies its business into proprietary owned brands and non- proprietary brand hotel divisions, under which it manages the business. Among its proprietary branded hotels, Wyndham is positioned in the luxury segment under the Grand Bay Hotel & Resorts(R) brand; in the upscale segment under WyndhamTM; and in the mid-priced segment under the ClubHouse brand. Additionally, Wyndham offers proprietary branded all-suite accommodations through its upscale Summerfield Suites brand and its mid-priced Sierra Suites brand. Other proprietary hotel brands owned and developed by Wyndham include Malmaison and Grand Heritage(R). Description of reportable segments Wyndham has six reportable segments: Wyndham hotel properties, resort properties, all suite properties, non-proprietary branded properties, other proprietary branded hotel properties and other. . Wyndham hotel properties include Wyndham Hotels, Wyndham Gardens and Wyndham Grand Heritage. The Wyndham hotel properties are full-service properties that generally offer a full range of meeting and conference facilities and banquet space. Facilities generally include restaurants and lounge areas, gift shops and recreational facilities, including swimming pools. Full-service hotels generally provide a significant array of guest services, including room service, valet services and laundry. . Resort properties include Wyndham Resorts, Grand Bay resort properties and other resort properties. Resorts are designed to offer unique destinations which appeal to today's sophisticated vacation traveler and to blend with their environment, enhancing the natural surroundings with design that fits the locale. Each resort's recreational activities are of the highest caliber and are designated to capitalize on the natural attractions of the location. Many offer a combination of golf, tennis, skiing, health spa, hiking and other sports. . All suite properties include the Summerfield and Sierra Suite properties. The Summerfield and Sierra Suite properties generally target the business travelers who usually anticipate a one to two week stay. The suites generally have limited public space and offer limited food and beverage service. However, the suites provide guests with larger rooms and work space. . Non-proprietary branded properties include all properties which are not Wyndham hotel properties, resort properties, all suite properties or other proprietary branded properties. The properties consist of non- Wyndham branded assets such as: Crowne Plaza(R), Embassy Suites(R), Marriott(R), Courtyard by Marriott(R), Sheraton(R) and independents. . Other proprietary branded hotel properties include Malmaison, Grand Heritage, Clubhouse and hotels acquired in the Arcadian acquisition. 21 WYNDHAM INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (dollars in thousands, except per share amounts) (unaudited) . Other includes participating lease revenues, racecourse facility revenue and expenses, management fee and service fee income, interest and other income, general and administrative costs, interest expense, depreciation and amortization and other one-time charges. General and administrative costs, interest expenses and depreciation and amortization are not allocated to each reportable segment; therefore, they are reported in the aggregate within this segment. Measurement of segment profit or loss Wyndham evaluates performance based on the operating income or loss from each business segment. The accounting policies of the reportable segments are the same as those described in Note 1. Factors management used to identify the reportable segments Wyndham's reportable segments are determined by brand affiliation and type of property. The reportable segments are each managed separately due to the specified characteristics of each segment.
Non- Other Wyndham Suite proprietary Proprietary Hotels Resorts Properties Branded Branded Other Total -------- -------- ---------- ----------- ----------- --------- ---------- Three Months Ended September 30, 1999 Total revenue........... $127,636 $111,827 $ 37,128 $258,978 $27,150 $ 16,562 $ 579,281 Operating income (loss)................. $ 31,916 $ 11,667 $ 8,253 $ 61,492 $ 8,317 $(167,905) $ (46,260) Three Months Ended September 30, 1998 Total revenue........... $119,200 $ 93,344 $ 34,295 $281,066 $26,426 $ 49,519 $ 603,850 Operating income (loss)................. $ 26,264 $ 7,886 $ 9,499 $ 57,403 $ 8,885 $(163,422) $ (53,485) Nine Months Ended September 30, 1999 Total revenue........... $417,572 $397,482 $105,433 $835,535 $73,860 $ 71,627 $1,901,509 Operating income (loss)................. $114,762 $ 98,824 $ 22,663 $197,971 $21,794 $(721,164) $ (265,150) Nine Months Ended September 30, 1998 Total revenue........... $388,847 $293,570 $ 44,470 $484,406 $55,691 $ 159,096 $1,426,080 Operating income (loss)................. $ 99,045 $ 67,058 $ 10,313 $118,424 $18,945 $(343,982) $ (30,197)
The following table represents revenue information by geographic area for the three and nine month periods ending September 30, 1999 and 1998. Revenues are attributed to the United States and its territories and Europe based on the location of hotel properties. The hotel properties in Europe were acquired on April 6, 1998. Prior to this date, all of Wyndham's business was attributed to hotel properties located in the United States and its territories.
United States Europe Total ------------- ------- ---------- Three months ended September 30, 1999 - ------------------------------------- Revenues....................................... $ 556,918 $22,363 $ 579,281 Three months ended September 30, 1998 - ------------------------------------- Revenues....................................... $ 583,025 $20,825 $ 603,850 Nine months ended September 30, 1999 - ------------------------------------ Revenues....................................... $1,841,991 $59,518 $1,901,509 Nine months ended September 30, 1998 - ------------------------------------ Revenues....................................... $1,387,027 $39,053 $1,426,080
22 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations included in Patriot's and Wyndham's Joint Annual Report on Form 10- K, as amended, for the year ended December 31, 1998. Certain statements in this Form 10-Q constitute "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995 (the "Act"). The words "believe," "expect," "anticipate," "intend," "estimate" and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Although forward-looking statements reflect management's good faith beliefs, forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievement of Wyndham to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Wyndham undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Certain factors that might cause a difference include, but are not limited to, risks associated with the availability of equity or debt financing at terms and conditions favorable to Wyndham, Wyndham's ability to integrate new acquisitions into its operations and management; risks associated with the course of litigation; Wyndham's ability to effect sales of assets on favorable terms and conditions; risks associated with the hotel industry and real estate markets in general; competition within the lodging industry; the ability of the Company, owners of properties it manages or franchises and others to address the Year 2000 issue; the impact of general economic conditions in the United States; risks associated with debt financing; and other risks and uncertainties set forth in the Company's annual, quarterly and current reports and proxy statements. THE COMPANY Effective June 30, 1999, Patriot and Old Wyndham completed a series of transactions which included a restructuring of their existing organizational structure. As a result of this restructuring, a wholly-owned subsidiary of Old Wyndham was merged with and into Patriot, with Patriot being the surviving entity. As such, Patriot is now a wholly-owned subsidiary of Old Wyndham, and this combined entity, together with all subsidiaries, is hereafter referred to as Wyndham. In connection with this restructuring, the pairing agreement between Patriot and Old Wyndham was terminated. Patriot's status as a real estate investment trust terminated effective January 1, 1999, and Patriot became a taxable corporation as of that date. The restructuring was reflected as a reorganization of two companies under common control and was accounted for in a manner similar to that used in pooling of interests accounting. As such, there was no revaluation of the assets and liabilities of Old Wyndham or Patriot. The 1999 financial statements of Wyndham are presented on a consolidated basis, representing the operations of the corporation and its subsidiaries, including Patriot. The 1998 financial statements of Wyndham are presented on a combined basis, representing the combined results of both Old Wyndham and Patriot. All significant intercompany accounts and transactions have been eliminated. At September 30, 1999, Wyndham, directly or through its subsidiaries, owned interests in 175 hotels totaling over 43,000 rooms and leased 39 hotels from third parties totaling over 5,700 rooms. In addition, Wyndham managed 89 hotels with over 21,000 rooms for third party owners and franchised 11 hotels under the Wyndham, Summerfield or ClubHouse brands with over 2,600 rooms. The hotels are diversified by franchise or brand affiliation and serve primarily major U.S. business centers. In addition to hotels catering primarily to business travelers, Wyndham's portfolio includes world-class resort hotels and prominent hotels in major tourist destinations. 23 Asset sales and acquisitions In January 1999, Patriot acquired the remaining 25% minority interests in each of the five following hotels; Embassy Suites Schaumburg, the Hilton Dania, the Marriott Suites at Valley Forge, the Marriott Boston Andover and the Marriott Tysons Corner from CIGNA. The acquisition of such interests was financed through additional mortgage indebtedness totaling $49.8 million and the sale of an additional 10% interest in the Marriott Warner Center. In February 1999, Patriot and Old Wyndham sold their interest in the Bay Meadows Racecourse located in San Mateo, California. Patriot and Old Wyndham received cash proceeds of approximately $3.4 million after payment of legal costs and other closing costs. Patriot and Old Wyndham recognized an estimated impairment loss on assets held for sale of $42.2 million related to the racecourse facility in 1998. In connection with the transaction, Patriot terminated its lease to Wyndham for the racecourse facilities. The actual loss on the sale of the asset was $42.8 million. In March 1999, Patriot sold the Holiday Inn Crockett, realizing net cash proceeds of approximately $18.0 million and recognized a gain of approximately $2.6 million. In April 1999, Patriot acquired the remaining 10% minority interests in each of the four following hotels; the Radisson Akron; the Courtyard Beachwood; the Holiday Inn Westlake; the Radisson Beachwood from IAH Snavely L.L.C. ("Snavely"). In addition, Patriot sold the Holiday Inn Beachwood to Snavely. The transaction generated net proceeds of approximately $8.8 million. Patriot recorded a loss on the sale of approximately $6.6 million. On April 30, 1999, Patriot sold the following hotels: Hampton Inn Rochester, Hampton Inn Jacksonville, Hampton Inn Cleveland, and the Hampton Inn Canton, for net proceeds of approximately $23.5 million and recognized a loss of approximately $1.4 million. On May 7, 1999, Patriot exercised its option to purchase the interest in ISIS 2000, formerly owned by certain related parties and Old Wyndham senior executive officers, for a cash payment of $3.1 million. Subsequent to the exercise of the option, Wyndham owns 100% of this entity which provides reservations and other services to Wyndham. On May 11, 1999, Wyndham sold the Holiday Inn Sebring for net proceeds of approximately $4.1 million, and recognized a gain of approximately $0.6 million. On May 18, 1999, Wyndham purchased the Billerica hotel for a total purchase price of approximately $23.8 million including the assumption of debt of $16.4 million. On July 30, 1999, Wyndham sold the Holiday Inn Redmont for net cash proceeds of $1.8 million and recognized a loss of approximately $191,000. On July 30, 1999, a wholly-owned subsidiary of Wyndham merged with Gencom Interest, Inc. As a result of the merger, Wyndham acquired the remaining 34.52% interest in the Omni Baltimore hotel, and 421,161 shares of Wyndham class A common stock owned by Gencom Interest Inc. The total purchase consideration for the merger was approximately $6.0 million which consisted of 1,336,276 shares of Wyndham class A common stock. On September 3, 1999, Wyndham sold certain land located in San Mateo, California, to the Susan W. Lakatos Separate Property Trust Agreement, the Rot Family Trust, and Ernest Weil Family Trust U.T.A. for a gross purchase price of $3.5 million and recognized a gain of approximately $1.0 million. On September 10, 1999, Wyndham acquired the remaining 75% interest in Le Manoir de Gressey, an 86 room hotel located near Paris, France for a total purchase price of approximately FRF 41.5 million, 24 (approximately $6.7 million based on exchange rates at the time of closing) and assumed debt of approximately FRF 51 million (approximately $8.2 million based on exchange rates at the date of the closing). Equity investment Effective June 30, 1999, Wyndham completed a $1 billion equity investment with a group of investors. Pursuant to the terms of this investment Wyndham issued 9.55 million shares of series B convertible preferred stock in exchange for gross proceeds of $955 million, representing an approximate 41% voting control of Wyndham. The remaining $45 million of this investment was funded through the transfer of one of the investor's loan receivable from PAH Realty Company, LLC. to Wyndham International Inc. for the purchase of 450,000 shares of series B convertible preferred stock. Wyndham incurred approximately $77.5 million in costs directly attributable to the equity investment. Among other terms, this series B preferred stock pays quarterly dividends on a cumulative basis, at a rate of 9.75% per year, and is convertible at the holders option into Wyndham class B common stock. For a period of 170 days following the completion of the investment, Wyndham may redeem up to $300 million of the series B convertible preferred stock at a redemption price of $102.00 per share (102% of the stated amount) plus all accrued dividends. Wyndham intends to fund this redemption with the proceeds of its offering to its stockholders and to the limited partners in the Operating Partnerships of rights to purchase up to three million shares of its series A convertible preferred stock, which generally has the same economic terms as the series B convertible preferred stock, but has no voting rights, except as required by law and except for a limited right to elect two directors if dividends are in arrears for six quarterly periods. The record date for the rights offering is September 30, 1999. The registration statement for the rights offering was declared effective on November 8, 1999, and the rights offering will expire on December 8, 1999. Organizational restructuring As a condition of the above investment, Old Wyndham was required to terminate its pairing agreement with Patriot and restructured its existing organization such that Patriot became a wholly-owned subsidiary of Wyndham. Patriot's status as a real estate investment trust terminated effective January 1, 1999, and Patriot became a taxable corporation as of that date. Wyndham recorded a one-time charge of $675 million as required by SFAS No. 109 to establish a deferred tax liability that resulted from Patriot's change in tax status from a REIT to a C corporation. This charge is included in income tax expense in the accompanying 1999 condensed consolidated statement of operations. Wyndham also recorded a restructuring charge of $189.3 million as a result of the termination of the paired share structure, and management's decision to exit out of certain activities, resulting in the write-down of certain nonstrategic assets, and costs to sever certain employees. Wyndham recorded a charge of approximately $83.1 million for the write off of the unamortized intangible asset associated with the paired share structure which was abandoned on June 30, 1999. In addition, Wyndham incurred approximately $4.7 million in severance and employee related costs for seven employees in the New York corporate office and two employees in the Dallas corporate office. The New York office was closed on June 30, 1999 and its employees were terminated at that time. Wyndham has paid $4.2 million in the form of cash and forgiveness of debt, the remaining unpaid portion of $0.5 million has been included in accrued liabilities at September 30, 1999. Wyndham has also paid $0.5 million in professional fees associated with the restructuring. Wyndham recorded a charge of $83.0 million for the write-down of assets to estimated fair value including $28.4 million of goodwill as a result of management's strategy to exit from the European market for their non-branded assets which will be sold. In addition, Wyndham recorded costs of $7.2 million associated with anticipated staffing reductions and other exits costs necessary to reduce Wyndham's infrastructure in Arcadian International, Wyndham's management division in Europe. Included in accounts payable and accrued expenses 25 at September 30, 1999 was $3.3 million related to severance costs to terminate 67 employees in the European office and $2.8 million related to other exit costs, primarily lease cancellations. Wyndham expects these actions to be completed by December 31, 1999. In addition, a charge of $8.3 million for the tradename intangibles attributable to the Carefree brand was recorded, as management has decided that none of the owned or managed assets will carry the Carefree brand now or in the future. On August 11, 1999, Wyndham announced its plan to realign its luxury division in its continuing efforts to streamline its organization. As a result, the Phoenix division office was closed on September 10, 1999. Wyndham recorded costs of $2.0 million associated with severance payments for staffing reductions of 19 employees, and $0.5 million for other exit costs. As of September 30, 1999, included in accounts payable and accrued expenses was $2.3 million related to severance costs and other exit costs that have not yet been completed as of September 30, 1999. Wyndham expects these actions to be completed by March 31, 2000. As part of the restructuring, the preferred stockholders of Old Wyndham were offered an opportunity to exchange their preferred stock for Wyndham class A common stock. Each of the 1.78 million shares of Old Wyndham series A preferred stock and each of the 1.78 million shares of Old Wyndham series B preferred stock were exchanged for one share of Wyndham class A common stock. Pursuant to the merger of a wholly-owned subsidiary of Old Wyndham with Patriot, each outstanding paired share and shares of Patriot series A preferred stock was converted into a single share of Wyndham class A common stock and each outstanding share of Patriot series B preferred stock was converted into $25 per share and $1.61 of accrued dividends, or an aggregate of $14.9 million in cash. Additionally, the third party limited partners in both the Patriot Partnership and the Wyndham Partnership were offered an opportunity to exchange their limited partnership interests for Wyndham class A common stock. As a result, an additional 15.1 million shares of Wyndham class A common stock were issued in exchange for limited partnership units in the Operating Partnerships. The effect of the exchange of certain limited partners' interests for Wyndham class A common stock, resulted in an adjustment to the basis of certain assets from the application of EITF 95-7. This adjustment is reflected in the accompanying condensed consolidated balance sheet as a reduction in basis of Wyndham's investment in real estate and related improvements of $37.2 million, investment in unconsolidated subsidiaries of $2.6 million and goodwill and intangibles of $78.4 million. Interstate's third-party hotel management business On May 27, 1998, Old Wyndham and Old Interstate entered into a settlement agreement, as amended, with Marriott which addressed certain claims asserted by Marriott in connection with Old Wyndham's then proposed merger with Old Interstate. The settlement agreement provided for the dismissal of litigation brought by Marriott, and allowed Old Wyndham's merger with Old Interstate to close. In addition to dismissal of the Marriott litigation, the settlement agreement provides for the re-branding of ten Marriott hotels under the Wyndham name, the assumption by Marriott of the management of ten Marriott hotels formerly managed by Old Interstate for the remaining term of the Marriott franchise agreement, and the spin-off by Wyndham of the third-party management business. Effective June 18, 1999, Old Wyndham distributed approximately 92% of Interstate in the form of a dividend to shareholders. Shareholders of record on June 7, 1999 received one share of newly issued Interstate stock for every thirty paired shares of Patriot and Old Wyndham. The remaining 8% is owned equally by Wyndham and Marriott International, Inc. As a result of the spin-off, Wyndham now also owns an approximate 55% non- controlling interest in the subsidiary of Interstate which now operates the third-party management business that Wyndham acquired from Old Interstate. 26 Forward equity contracts Wyndham's aggregate obligation under the forward equity contracts was approximately $335.8 million at June 30, 1999. Effective June 30, 1999, Wyndham settled in full all of the forward equity contracts in cash, with part of the proceeds of the $1 billion equity investment. The 100.7 million shares owned or held by the counterparties were retired effective June 30, 1999. WYNDHAM INTERNATIONAL, INC. Results of operations: quarter ended September 30, 1999 compared with quarter ended September 30, 1998 For the three months ended September 30, 1999, Wyndham (including its consolidated subsidiaries) had hotel revenues of $562,720,000 as compared to $554,331,000 during the three months ended September 30, 1998. The increase of $8,389,000 or 1.5% was primarily a result of several offsetting factors. Revenues increased from the acquisition of leaseholds from DTR North Canton Inc. (the "Doubletree Lessee") and North Coast Hotels, L.L.C. ("North Coast"), the buyout of the controlling interest of two hotels, Crowne Plaza Ravinia and Wyndham Windwatch, and by the opening of several hotels which were previously under development. This increase was offset by a series of assets sales that have occurred from November 1998 and the spin-off of Interstate's third party management business, which also included several leased hotels. Hotel expenses increased $11,556,000 from $417,814,000 to $429,370,000, as with revenues, this 2.8% difference was a result of the offsetting factors as discussed above. Participating lease revenue declined to $341,000 from $8,932,000, in the third quarter of 1999 as a result of the acquisition of the leaseholds from third party lessees as discussed above. At September 30, 1999, Wyndham owned one hotel that was leased to a third party, as compared to fourteen at September 30, 1998. Management fee and service fee income was $13,968,000 and $24,358,000 for the three months ended September 30, 1999 and 1998, respectively. The decrease is primarily the result of the spin-off of Interstate's third party management business on June 18, 1999. Interest and other income decreased from $6,274,000 for the three months ended September 30, 1998 to $2,252,000 for the three months ended September 30, 1999. This decrease is primarily the result of $2,623,000 of business interruption insurance proceeds received in the third quarter of 1998 as a result of hurricane Georges. Total revenues and expenses from the racecourse facility operations were $9,955,000 and $8,810,000 respectively, for the three months ended September 30, 1998. There were no revenues or expenses for the same period in 1999, as the racetrack operations were sold in February of 1999. General and administrative expenses were $32,238,000 for the three months ended September 30, 1999 as compared to $26,571,000 for the same period last year. This increase of $5,667,000 is due in part to increases in salaries and costs to attract and retain top management in the Company. In addition, Wyndham has also reflected in general and administrative expenses, costs of $2,028,000 for the quarter associated with becoming Year 2000 compliant and $2,000,000 of additional professional fees related to the reorganization of the Company. The increase was partially offset by the spin-off of Interstate's third party management business. As discussed in Note 4, Wyndham recorded a restructuring charge of $3,906,000 for the third quarter of 1999. Wyndham recorded these costs primarily due to realignment of the luxury division. This resulted in the closure of the Phoenix division office, and costs associated with severance payments for staffing reductions, and office lease cancellation costs. Depreciation and amortization expense was $75,653,000 for the three months ended September 30, 1999, compared to $68,236,000 for the three months ended September 30, 1998. The increase in depreciation was primarily due to the increase in capital renovations during the year, as well as the placement in service of additional assets that were previously under development. Interest expense for the three months ended September 30, 1999 was $85,478,000 compared to $82,739,000 in 1998 resulting in an increase of $2,739,000. This increase was primarily a result of lower capitalized interest 27 for the current period. In the third quarter of 1999, capitalized interest totaled $575,000 as compared to $3,619,000 for the same period last year. This decrease was a result of the placement in service of several hotels that were under development in the third quarter of 1998. In connection with the acquisition of certain leaseholds and license agreements, Wyndham recognized an expense of $3,940,000 related to the cost of acquiring these agreements for the third quarter of 1998; no such expenses were recognized for the same period in 1999. In the third quarter of 1998, $525 million in treasury interest rate locks with specified interest rates of 6.06%, 6.07% and 5.62% were settled resulting in a charge to earnings of $49,225,000, no such charge was recognized for the same period in 1999. Wyndham's share of losses from unconsolidated subsidiaries was $931,000 for the three months ended September 30, 1999 as compared to income of $1,888,000 in 1998. The decrease is primarily a result of two hotels, Crowne Plaza Ravinia and Wyndham Windwatch, no longer being accounted for as an equity investment. In June of 1999, Wyndham acquired the 1% controlling interest in these hotels, and as a result they are now being accounted for on a consolidated basis. Minority interest's share of loss associated with the Operating Partnerships was $4,722,000 for the nine months ended September 30, 1998. There was no minority interest's share of loss associated with the Operating Partnerships for the third quarter of 1999 due to amendments in the partnership agreements at June 30, 1999, which amended the allocation of profit and loss to the limited partners. Minority interest's share of income in Wyndham's other consolidated subsidiaries was $760,000 in the third quarter 1999 as compared to $4,500,000 in the same period in 1998. This reduction in minority interest is due primarily to the acquisition of the third party's interests in four hotels from Snavely, five hotels from CIGNA, and the Omni Baltimore. The benefit for income taxes was $3,868,000 for the three months ended September 30, 1999 as compared to a provision of $6,783,000 for the three months ended September 30, 1998. For federal income tax purposes, the taxable income from these entities cannot be consolidated with Wyndham's taxable income or loss, and hence cannot be offset by operating losses created at the Wyndham Partnership. The extraordinary loss of $1,257,000 for the three months ended September 30, 1998, was a result of the charge for the write-off of deferred loan costs associated with debt refinancing of certain mortgage debt; no such expenses were recognized for the same period in 1999. Primarily as a result of the foregoing, the Company reported a net loss of $44,565,000 for the three months ended September 30, 1999 compared to a net loss of $59,415,000 for the three months ended September 30, 1998. Results of operations: nine months ended September 30, 1999 compared with nine months ended September 30, 1998 For the nine months ended September 30, 1999, hotel revenues were $1,829,882,000 as compared to $1,266,985,000 during the nine months ended September 30, 1998. Of the approximate $562,897,000 increase, approximately $376,451,000 was attributable to the 1998 acquisitions including Interstate, Summerfield, Arcadian International and WHG, net of the leases which were included in the Interstate spin-off. In addition, the purchase of the remaining third party leaseholds interests, primarily CHC Lease Partners, NorthCoast Hotels, and Doubletree Lessee, in June 1998, December 1998 and January 1999 led to increases of hotel revenue of $110,934,000 as the operations of the hotels during 1999 were consolidated in the statement of operations, whereas in 1998, Wyndham was receiving a participating rent payment. Additionally, $20,421,000 can be attributed to the hotels now in operation which were previously under development, and the consolidation of two hotels which were previously accounted on as an equity investment. Hotel expenses increased from $924,471,000 28 in 1998 to $1,325,646,000 in 1999. As with revenues, the vast majority of this increase is a result of these acquisitions and the acquisition of the third party leaseholds. As a percentage of revenue, gross operating profits remained relatively constant between periods rising from 27.0% in 1998 to 27.6% in 1999. The contributing factor of the decline in participating lease revenue from $49,627,000 during the nine months ended September 30, 1998, to $929,000 for the same period in 1999 was the acquisition of the third party leaseholds as discussed above. Management fee and service fee income was $57,186,000 and $61,574,000 for the nine months ended September 30, 1999 and 1998, respectively. The decrease is primarily the result of a decrease in incentive fee income associated with seventeen management contracts which were renewed in 1998 with no provision to earn incentive fees, and management contracts lost during the period. This was partially offset by the acquisition of third party management contracts acquired through the Summerfield acquisition in June 1998, and the Interstate management contracts also acquired in June 1998, but were included in the Interstate spin-off on June 18, 1999. Interest and other income was $12,949,000 in 1998 as compared to $8,951,000 in 1999. The decrease of $3,998,000 resulted from a termination fee of $2,950,000 and $2,623,000 of business interruption insurance proceeds received in 1998. Total revenues from the racecourse facility operations (including interest and other income) were $4,561,000 for the nine months ended September 30, 1999 compared to $34,945,000 for the same period last year. Total costs and expenses associated with the racecourse operations (included marketing costs, and general and administrative expenses) were $3,867,000 for the nine months ended September 30, 1999 compared to $29,667,000 for the same period last year. These decreases are due to the sale of Bay Meadows racecourse effective February 1999. General and administrative expenses were $143,596,000 for the 1999 period compared to $64,558,000 for the 1998 period. In part, the increase of $79,038,000 is due to the increased overhead associated with the growth in the portfolio of owned managed and leased hotels during 1998. However, the significant portion of the increase was due to several factors as follows: As a result of the $1 billion equity investment, Wyndham incurred costs of $6,737,000 due to the acceleration of vesting of certain employees' stock awards and Wyndham incurred $3,818,000 of expenses in reviewing different strategic alternatives. The reorganization resulted in work associated with a high yield bond offering and a bond offering in Puerto Rico to cease, resulting in a write-off of costs associated with the offerings totaling $3,710,000 and $5,228,000 in other abandoned transaction costs. Wyndham also incurred $4,681,000 in legal and unwind fees in order to settle the forward equity contracts at September 30, 1999 and $5,095,000 of costs associated with the spin-off on Intestate's third-party management business. In addition, Wyndham has also reflected in general and administrative expenses, costs associated with becoming Year 2000 compliant of $5,703,000 during 1999. Wyndham also recorded $4,695,000 in bad debt expense for the write-off of receivables from a hotel that Wyndham no longer intends to manage and has terminated the management contract. Cost of acquiring license agreements and leaseholds was $803,000 for the nine months ended September 30, 1999 as compared to $61,000,000 for the same period in 1998. This decrease is primarily due to the prior year amount including the purchase of 17 leasehold interest acquired in connection with the CHCI merger. As discussed in Note 4, Wyndham recorded $189,288,000 of costs associated with the restructuring. The costs primarily consisted of the following: $83,094,000 for the write off of an intangible asset associated with the paired share structure which was abandoned on June 30, 1999, and $4,675,000 associated with severance payments due to the elimination of job responsibilities. In addition, Wyndham reflected $82,957,000 in costs to write-down assets to estimated fair values, including goodwill of $28,394,000 as a result of management's strategy to exit from the European market for non- branded assets which will be sold, and $7,226,000 in staffing 29 reductions and other exit costs, primarily lease cancellations, necessary to reduce Wyndham's infrastructure in Arcadian International, Wyndham's management division in Europe. Wyndham also recorded a charge of $8,263,000 for the write-off of the Carefree trade name that will no longer be used with any existing or future hotels. In the third quarter, Wyndham decided to close its Phoenix division office and recorded $2,500,000 of costs associated with severance, lease cancellations, and other exit costs, and $573,000 of additional professional fees. Interest expense for the nine months ended September 30, 1999 was $266,678,000 as compared to $172,191,000 for the same period last year. The increase is due in part to the closing of $1.45 billion in debt in June 1998 for the merger with Old Interstate. Secondly, as a result of extending certain maturities of the credit facilities, Wyndham paid $11,700,000 in fees which has been reflected in interest expense. Finally, Wyndham assumed, and incurred additional debt in order to finance the Summerfield, Interstate and Arcadian transactions during 1998. In 1998, $525 million in treasury rate locks with specified interest rates of 6.06%, 6.07%, and 5.62% were settled resulting in a charge to earnings of $49,225,000. No such charge was recognized for the same period in 1999. Depreciation and amortization expense was $232,558,000 for the nine months ended September 30, 1999 compared to $155,165,000 for the nine months ended September 30, 1998. Of the $77,393,000 increase, $47,700,000 was attributable to the significant transactions which occurred during the first nine months of 1998, which included Arcadian International in April 1998, and Summerfield, CHCI, and Interstate in June 1998. The remaining increase is due to depreciation on renovations at the hotels and amortization of goodwill. Wyndham's share of income from unconsolidated subsidiaries was $3,000,000 for the nine months ended September 30, 1999 as compared to $7,375,000 for the nine months ended September 30, 1998. The decrease is primarily a result of two hotels, Crowne Plaza Ravinia, and Wyndham Windwatch no longer being accounted for as an equity investment. In June of 1999, Wyndham acquired the 1% controlling interest in these hotels, and thus are now being accounted for on a consolidated basis. In addition, the decrease is due to the allocation of losses from the company's approximate 55% investment in Interstate. The provision for income taxes increased from $11,273,000 for the nine months ended September 30, 1998 to $651,053,000 for the nine months ended September 30, 1999. The increase is primarily due to the $675,000,000 charge recorded during June 1999 due to Patriot converting from a REIT to a C corporation, and the operations of certain special purpose controlled subsidiaries, which separately report and pay taxes on their taxable income. For federal income tax purposes, the taxable income from these subsidiaries cannot be consolidated with Wyndham's taxable income or loss and hence can not be offset by operating losses created at the Wyndham Partnership. Minority interest's share of loss associated with the Operating Partnerships was $6,642,000 for the nine months ended September 30, 1999 as compared to $6,169,000 for the same period last year due to increased losses in the Operating Partnerships prior to the amendments in the partnership agreements. Minority interest's share of income in Wyndham's other consolidated subsidiaries was $4,824,000 in 1999 as compared to $7,514,000 in 1998. This reduction in minority interest's share of income is due primarily to the acquisition of the outside interests in four hotels from Snavely, five hotels from CIGNA, and the Omni Baltimore. For the nine months ended 1998, certain debt obligations of Old Wyndham, Interstate and Summerfield were repaid upon the merger and acquisition of these entities. In addition, certain debt of WHG was refinanced in 1998. As a result, Wyndham incurred certain prepayment penalties and wrote off the remaining balance of unamortized deferred financing costs associated with such debt resulting in an extraordinary loss of $31,817,000, net of minority interest and income taxes. In connection with the new debt financing in 1999, Wyndham wrote off the remaining balance of unamortized deferred financing costs associated with the Old Credit facility resulting in an extraordinary loss of $9,838,000, net of minority interest and income taxes. As a result, the net loss was $921,223,000 for the nine months ended September 30, 1999 and $67,257,000 for the nine months ended September 30, 1998. 30 Results of reporting segments: Quarter ended September 30, 1999 compared with quarter ended September 30, 1998 Wyndham's results of operations are classified into six reportable segments. Those segments include Wyndham hotels, resort properties, all suite properties, other proprietary branded properties, non-proprietary branded properties and other. Wyndham hotel properties include Wyndham Hotels, Wyndham Gardens and Wyndham Grand Heritage and represent approximately 22.0% and 19.7% of total revenue for the three months ended September 30, 1999 and 1998, respectively. Total revenue was $127,636,000 compared to $119,200,000 for the quarters ended September 30, 1999 and 1998, respectively. Operating income for the Wyndham hotels was $31,916,000 compared to $26,264,000 for the quarters ended September 30, 1999 and 1998, respectively. The increases in both revenue and operating income is primarily attributed to the opening of several Wyndham branded hotels subsequent to the third quarter of 1998, such as Wyndham Dallas Park Central, Wyndham Boston, Wyndham Downtown Atlanta, Wyndham Billerica, and the acquisition of the controlling interest in the Wyndham Windwatch. Resort hotel properties, including Grand Bay and Wyndham represent approximately 19.3% and 15.5% of total revenue for the quarters ended September 30, 1999 and 1998, respectively. Total revenue was $111,827,000 compared to $93,344,000 for the quarters ended September 30, 1999 and 1998, respectively. The increase of $18,483,000 is attributable in large part to increased revenues at three resorts in Puerto Rico. These three hotels experienced an increase in revenues of $16,372,000, primarily because their revenues for the third quarter of 1998 were significantly affected by hurricane Georges. Operating income for the resort properties was $11,667,000 compared to $7,886,000 for the quarters ended September 30, 1999 and 1998, respectively. As with revenues, the increase in operating income of $3,781,000 can be attributed to the three resorts in Puerto Rico. These resorts reflected a $3,745,000 increase from the prior quarter, as again the third quarter of 1998 was impacted by hurricane Georges. All suite properties, including Summerfield and Sierra, represent approximately 6.4% and 5.7% of total revenue for the three months ended September 30, 1999 and September 30, 1998. Total revenue and operating income were $37,128,000 and $8,253,000, respectively, for the three months ended September 30, 1999, compared to $34,295,000 and $9,499,000, respectively, for the three months ended September 30, 1998. The increase in revenues can primarily be attributed to the branding of the Plaza Park hotel as a Summerfield Suites. In the third quarter of 1998, this hotel was leased to a third party, NorthCoast hotels. Other proprietary branded properties, including Malmaison, Grand Heritage, Clubhouse and hotels acquired in the Arcadian acquisition, represent approximately 4.7% and 4.4% of total revenue for the quarters ended September 30, 1999 and 1998, respectively. Total revenue was $27,150,000 compared to $26,426,000 for the quarters ended September 30, 1999 and 1998, respectively. Operating income for these properties was $8,317,000 and $8,885,000 for the quarters ended September 30, 1999 and 1998, respectively. Non-proprietary branded properties, including Hilton, Holiday Inn, Marriott, Ramada, Radisson, Hampton and other major hotel franchises, represent approximately 44.6% and 46.5% of total revenue for the quarters ended September 30, 1999 and 1998, respectively. Total revenue was $258,978,000 compared to $281,066,000 for the quarters ended September 30, 1999 and 1998, respectively. The decrease is due primarily to the spin-off of several leases in connection with the Interstate spin-off on June 18, 1999, as well as the sale of non-proprietary branded assets throughout the year. This decrease was partially offset by the acquisitions of leaseholds from North Coast and the Doubletree Lessee in November 1998 and January 1999. Operating income for these properties was $61,492,000 and $57,403,000 for the quarters ended September 30, 1999 and 1998, respectively. The increase in operating income is primarily attributable to the acquisition of leaseholds from NorthCoast and the Doubletree Lessee. Other represents revenue from various operating businesses including management and other service companies, and participating lease revenue for one hotel and a parcel of land. Expenses in this segment are primarily interest, depreciation, amortization and corporate general and administrative expenses. Wyndham recorded restructuring expenses that have also been included in this segment. Total revenue for the other segment 31 was $16,562,000 and $49,519,000 for the quarters ended September 30, 1999 and 1998, respectively. The overall $31,488,000 decrease in this segment's revenue was caused by several factors including, the sale of the Bay Meadows Race Track operations and leasehold effective February 1, 1999 which reduced revenue by approximately $9,955,000. The purchase of the remaining third party leasehold interests, North Coast Hotels in June and December of 1998, respectively, reduced participating lease revenue by $8,591,000 and third party management fees decreased by $10,390,000 primarily from the spin-off of Interstate's third party management business. Operating losses for the segment were $167,905,000 and $163,422,000 for the quarters ended September 30, 1999 and 1998, respectively. In addition to the decrease in revenues, the increase in the segment's operating loss is a result of increased expenses. Interest expense increased $2,739,000, depreciation and amortization increased $7,417,000 and corporate general and administrative expense increased $5,667,000. The sale of the Bay Meadows Race Track accounted for an approximate $8,810,000 decrease in expenses. Wyndham also recorded a restructuring charge of $3,906,000. Results of reporting segments Nine months ended September 30, 1999 compared with nine months ended September 30, 1998 Wyndham hotel properties represent approximately 21.9% and 27.3% of total revenue for the nine months ended September 30, 1999 and 1998, respectively. Total revenue was $417,572,000 in 1999 as compared to $388,847,000 in 1998 or an increase of 7.3%. Operating income was $114,762,000 in 1999 as compared to $99,045,000 in 1998. The increase in both revenues and operating income is primarily a result of the rebranding of certain hotels acquired in 1998 from non-proprietary brand to Wyndham Hotels, as well as the opening of several Wyndham hotels which were under development now placed in service. Resort hotel properties represent approximately 20.9% and 20.6% of total revenue for the nine months ended September 30, 1999 and 1998 respectively. Total revenue increased from $293,570,000 to $397,482,000 while operating income increased from $67,058,000 in 1998 to $98,824,000 in 1999. The increase is primarily due to the acquisition of the remaining partner's interest in resorts acquired in the merger with WHG Casinos & Resorts Inc. ("WHG") in March 1998. Prior to the acquisition, Wyndham accounted for its investment in El Conquistador and El San Juan, on the equity basis of accounting. Subsequent to the purchase of the partners' interest, the operations were consolidated into the statement of operations. In addition, hurricane Georges adversely affected 1998's third quarter revenues and earnings at several Wyndham resort properties. All suite properties represent approximately 5.5% and 3.1% of total revenue for the nine months ended September 1999, as compared to the same period in 1998. Total revenue increased from $44,470,000 to $105,433,000 and operating income increased from $10,313,000 to $22,663,000 for the nine months ended 1998 to 1999, respectively. Summerfield was not acquired until June of 1998; the timing of the acquisition is the primary reason for the increase of both revenues and operating income. Other proprietary branded properties represent approximately 3.9% and 3.9% of total revenue for the nine months ended September 1999, as compared to the same period in 1998. Total revenue increased from $55,691,000 to $73,860,000 and operating income increased from $18,945,000 to $21,794,000 for the nine months ended 1998 to 1999. The hotels acquired in the Arcadian acquisition were not acquired until April of 1998, accounting primarily for the increase of both revenues and operating income. Non-proprietary branded properties represent approximately 43.9% and 34.0% of total revenue for the nine months ended September 1999, as compared to 1998. Total revenue increased from $484,406,000 to $835,535,000 and operating income increased from $118,424,000 to $197,971,000 for the nine months ended 1998 to 1999, respectively. The increase is due primarily to the acquisition of the owned and leased Interstate properties, and the leasehold interest in CHC Lease Partners, NorthCoast, and the Doubletree Lessee. The increases were partially offset by asset sales during the year, as well as the loss of certain leaseholds in the Interstate spin-off. 32 Other represents revenue from various operating businesses including management and other service companies, and participating lease revenue for one hotel and a parcel of land. Expenses in the segment are primarily interest, depreciation and amortization and cooperate general and administrative expenses. In 1999, Wyndham also recorded restructuring expenses that have also been included in this segment. Total revenue for the other segment was $71,627,000 and $159,096,000 for the nine months ended September 30, 1999 and September 30, 1998 respectively. The overall $87,469,000 decrease in this segment's revenue was caused by several factors. The sale of Bay Meadows Race Track operations and leasehold effective February 1, 1999 reduced revenue by $30,384,000. The purchase of the third party leasehold interests, primarily CHC Lease Partners and NorthCoast Hotels reduced participating lease revenue by $48,698,000. Operating losses for the segment were $721,164,000 and $343,982,000 for the nine months ended September 30, 1999 and 1998, respectively. In addition to the decrease in revenues, the increase in the segment's operating loss is a result of increased expenses resulting from the mergers and acquisitions in 1998. Interest expense increased $94,487,000, depreciation and amortization increased $77,393,000 and corporate and general and administrative expenses increased $79,038,000. The sale of the Bay Meadows Racetrack accounted for an approximate $25,800,000 decrease in expenses, and the cost of acquiring the third party leaseholds in 1998 decreased expenses by an additional $60,197,000. However, Wyndham recorded a restructuring charge in 1999 of $189,288,000 contributing to the loss in this segment. Statistical information During 1999, Wyndham's portfolio of owned and leased hotels experienced moderate growth in both average daily rate ("ADR") and revenue per available room ("REVPAR") of approximately 1.2% and 0.8% for the three months ended September 30, 1999, and 2.0% and 1.2% for the nine months ended September 30, 1999, respectively, while occupancy remained relatively stable. Management attributes this growth to continued marketing efforts throughout the portfolio on hotels that have been newly renovated, and repositioned in certain cases, as well as to the current market conditions in the U.S. lodging industry. The following table sets forth certain statistical information for Wyndham's owned and leased hotels for the three and nine month periods ended September 30, 1999 and 1998 as if the hotels were owned at the beginning of the periods presented.
Three months ended September 30 ------------------------------------------- Occupancy ADR REVPAR ---------- --------------- --------------- 1999 1998 1999 1998 1999 1998 ---- ---- ------- ------- ------- ------- Wyndham Branded Hotels............. 70.6% 70.7% $107.59 $105.17 $ 75.99 $ 74.35 Grand Bay Hotels & Resorts......... 67.2% 64.7% $232.88 $232.99 $156.42 $150.62 Summerfield and Sierra Suites...... 82.4% 85.7% $120.61 $116.98 $ 99.35 $100.21 Malmaison.......................... 84.8% 83.4% $121.65 $123.49 $103.15 $102.99 Clubhouse.......................... 60.5% 69.5% $ 65.90 $ 67.53 $ 39.88 $ 46.95 Arcadian........................... 66.3% 62.4% $143.30 $148.88 $ 94.94 $ 92.80 Non Proprietary Brands............. 72.3% 72.2% $101.88 $101.89 $ 73.66 $ 73.57 Weighted average................... 72.0% 72.3% $107.53 $106.21 $ 77.45 $ 76.83 Nine months ended September 30 ------------------------------------------- Occupancy ADR REVPAR ---------- --------------- --------------- 1999 1998 1999 1998 1999 1998 ---- ---- ------- ------- ------- ------- Wyndham Branded Hotels............. 72.2% 72.6% $120.73 $117.71 $ 87.16 $ 85.48 Grand Bay Hotels & Resorts......... 71.3% 69.8% $279.76 $277.65 $199.36 $193.75 Summerfield and Sierra Suites...... 81.6% 83.3% $118.05 $117.12 $ 96.38 $ 97.56 Malmaison.......................... 84.0% 78.1% $124.23 $120.94 $104.30 $ 94.41 Clubhouse.......................... 60.1% 68.5% $ 66.91 $ 68.19 $ 40.21 $ 46.70 Arcadian........................... 65.0% 58.4% $135.09 $139.03 $ 87.81 $ 81.23 Non Proprietary Brands............. 71.7% 72.3% $103.56 $102.25 $ 74.29 $ 74.01 Weighted average................... 72.3% 72.9% $113.95 $111.74 $ 82.42 $ 81.46
33 LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents as of September 30, 1999 were $216.1 million, including restricted cash of $102.3 million. Cash and cash equivalents as of September 30, 1998 were $147.4 million, including capital improvement reserves of $29.1 million. Cash flow provided by operating activities Wyndham's principal source of cash to fund operating expenses and pay dividends on its preferred stock is cash flow provided by operating activities. Wyndham's principal source of cash flow is from the operation of the hotels that it owns, leases and manages. Cash flows from operating activities were $104.2 million for the nine months ended September 30, 1999, and $231.3 million for the nine months ended September 30, 1998. The decrease is primarily due to increased interest expense and general and administration expenses related to evaluating strategic alternatives and certain severance costs. As a result of the reorganization, Wyndham will pay significantly more in federal income taxes, but will have the ability to retain significantly more earnings than was previously the case because Wyndham is not required to distribute at least 95% or more of its taxable income to its shareholders. Wyndham anticipates that its enhanced ability to retain earnings will allow it to utilize cash flow from operating activities to fund maintenance, capital expenditures and acquisitions. Wyndham does not anticipate paying a dividend to its common shareholders. However, for the first six years, dividends on the series B convertible preferred stock are structured to ensure an aggregate fixed cash dividend payment of $29.25 million per year, so long as there is no redemption or conversion of the investors' preferred stock; therefore, for that period, dividends are payable partly in cash and partly in additional shares of preferred stock. For the following four years, dividends are payable in cash or additional shares of series B convertible preferred stock as determined by the Board of Directors. After year ten, dividends are payable solely in cash. The series A convertible preferred stock, which has the same economic terms as the series B convertible preferred stock, will also require dividend payments in cash and additional shares of series A convertible preferred stock, with the aggregate amounts being dependent upon the number of shares of series A convertible stock purchased pursuant to the rights offering. Cash flows from investing and financing activities Cash flows used in investing activities of Wyndham were $220.3 million for the nine months ended September 30, 1999, resulting primarily from the acquisition of hotel properties, property renovations and improvements, and cash deposited as escrows and property improvement reserves. Cash flows provided by financing activities of $106.8 million for the nine months ended September 30, 1999 were primarily related to the net proceeds from the sale of the series B preferred stock, the net proceeds from the new credit facility and the net proceeds from the new mortgage debt, partially offset by the repayment of the old credit facility, term loans, and the settlement of the forward equity contracts. Cash flows used in investing activities of Wyndham were $1.5 billion for the nine months ended September 30, 1998, resulting primarily from the acquisition of hotel properties and management companies, renovation expenditures at certain hotels, as well as cash deposited as collateral under the forward equity contracts. Cash flows from financing activities of $1.3 billion for the nine months ended September 30, 1998 were primarily related to borrowings under the revolving credit facility and mortgage notes, and net proceeds from private placements of equity securities, net of payments of dividends and distributions. As of September 30, 1999, Wyndham had approximately $1.3 billion outstanding under the term loan, $650 million outstanding under the increasing rate loan facility, and $100 million outstanding under the revolving credit facility. Additionally, Wyndham had outstanding letters of credit totaling $24.4 million. As of September 30, 1999, Wyndham also had over $1.5 billion of mortgage debt outstanding that encumbered 84 hotels and approximately $35.6 million in other debt, resulting in total indebtedness of approximately $3.5 billion. As of September 30, 1999, Wyndham had $375.6 million of additional availability under the new revolving credit facility. 34 Forward equity transactions Wyndham's aggregate obligation under the forward equity transactions was approximately $335.8 million at June 30, 1999. Effective June 30, 1999, Wyndham settled in full all of the forward equity transactions in cash, with part of the proceeds of the $1 billion equity investment. The 100.7 million shares owned or held by the counterparties were retired effective June 30, 1999. Credit facility and term loan Wyndham's old credit facility with The Chase Manhattan Bank, Chase Securities, Inc. and Paine Webber Real Estate consisted of a $900 million revolving credit facility and a series of term loans in the aggregate amount of $1.8 billion. Interest rates were based on Wyndham's leverage ratio and varied from 1.5% to 3.0% over LIBOR. On June 30, 1999 the credit facility and term loans were repaid with net proceeds of the $1 billion equity investment and the new credit facilities. New credit facility Concurrent with the closing of the $1 billion equity investment, Wyndham closed on a new $2.45 billion credit facility which consists of a $1.3 billion term loan with a seven year term, a $500 million revolving credit facility with a five year term, and a $650 million increasing rate loan facility with a five year term. Proceeds, net of closing costs and fees of approximately $41.1 million from the term loan and the revolving credit facility, and proceeds, net of closing costs and fees of approximately $17.9 million from the increasing rate loan facilities, were used to retire existing indebtedness. Interest rates are based upon LIBOR spread varying from 2.75% to 3.50% per annum for the term loan, and 1.25% to 2.75% per annum for the revolving credit facility, based both on Wyndham's leverage ratio, as defined, and whether any increasing rate loans are outstanding. If any of the increasing rate loan facility remains outstanding, the applicable margins shall be increased by 0.25%. The term loan and the revolving credit facility are guaranteed by the domestic subsidiaries of Wyndham, and are secured by pledges of equity interest held by Wyndham and its subsidiaries. Wyndham's ability to borrow under its revolving credit facility is subject to Wyndham's compliance with a number of customary financial and other covenants, including total leverage and interest coverage ratios. Interest rates for the increasing rate loans are based on LIBOR rates (less statutory reserves), plus 3.50% through September 30, 1999, and increasing 0.50% every three months, with a cap of LIBOR plus 4.75%. The lender under the increasing rate loans receive the benefit of the same guarantees and pledges of security provided under the new term loan, and revolving credit facility. New mortgage debt Effective June 30, 1999, Wyndham also closed on a $346 million mortgage loan with Bear, Stearns Funding, Inc., which is secured by twenty-five properties. The loan matures on July 1, 2004 and bears interest at the LIBOR rate, plus 3.25% per annum. Proceeds from the mortgage debt were used to retire existing mortgage indebtedness. Additionally, effective June 30, 1999, Wyndham closed on a $235 million mortgage loan with Lehman Brothers Holdings Inc., which is secured by ten properties. The mortgage loan has a three-year term, with a one year extension option, and bears interest at the LIBOR rate plus 3.50% per annum, plus an additional 1.75% on the principal amount payable at maturity. Proceeds from this mortgage loan were used to retire existing mortgage indebtedness. Renovations and capital improvements During the first nine months of 1999, Wyndham invested approximately $146.5 million in capital improvements, development projects and renovations. Management reserves an average of 4.0% of total hotel 35 revenues, and believes such amounts are sufficient to fund recurring capital expenditures for the hotels. Capital expenditures, exclusive of renovations, may exceed 4.0% of total hotel revenues in a single year. Wyndham attempts to schedule renovations and improvements during traditionally lower occupancy periods in an effort to minimize disruption to the hotel's operations. Therefore, management does not believe such renovations and capital improvements will have a material effect on the results of operations of the hotels. Capital expenditures will be financed through capital expenditure reserves or with working capital. Inflation Operators of hotels in general possess the ability to adjust room rates quickly. However, competitive pressures may limit Wyndham's ability to raise room rates in the face of inflation. Seasonality The hotel industry is seasonal in nature. Revenues for certain of Wyndham's hotels are greater in the first and second quarters of a calendar year and at other hotels in the second and third quarters of a calendar year. Seasonal variations in revenue at the hotels may cause quarterly fluctuations in the Wyndham's revenues. Year 2000 Compliance Many computer systems were not designed to interpret any dates beyond 1999, which could lead to business disruptions in the United States and internationally (the "Year 2000 issue"). Wyndham recognized the importance of minimizing the number and seriousness of any disruptions that may occur as a result of Year 2000 and implemented an extensive compliance program. The compliance program involved three major program areas: . corporate information technology infrastructure and reservation systems . other electronic assets, which include automated time clocks; point-of- sale systems; non-information technology systems, such as embedded technologies that operate fire-life safety systems, phone systems, energy management systems; and other similar systems . third parties with whom Wyndham conducts business Wyndham applied a three phase approach to each program area: . Inventory Phase--identified systems and third parties that may be affected by Year 2000 issues . Assessment Phase--prioritized the inventoried systems and third parties, assessed their Year 2000 readiness, and planned corrective actions . Remediation Phase--implemented corrective actions, verified implementation, and formulated contingency plans Wyndham, working with its consultants, identified various systems that were not Year 2000 compliant and developed appropriate remediation plans. To determine which of its systems were not compliant, Wyndham inventoried and assessed its corporate information technology infrastructure and reservation systems, and the information technology and other electronic assets located in Wyndham's hotels (the "Wyndham Compliance Hotels") for which it could implement independently or was authorized to implement its Year 2000 compliance program. At September 30, 1999, Wyndham could not initiate independently, nor was it authorized to implement, its compliance program at 72 hotels, of which 31 were either managed, but not owned, by Wyndham and 41 were owned, but not operated, by Wyndham (the "Third Party Compliance Hotels"). Wyndham believes that it has effected or will effect the necessary remediation of its systems and other electronic assets that were identified as failing to be Year 2000 compliant, and thereby will avoid substantial problems arising from Year 2000 issues. Wyndham continues to monitor and randomly test its systems to confirm the successful remediation of its systems. As a result of those efforts, Wyndham may undertake additional 36 reprogramming, upgrading and systems replacements in limited circumstances in order to further correct any problems that did not surface during the initial implementation and testing of those systems. Other than those limited circumstances, Wyndham has completed its remediation efforts involving its corporate information technology infrastructure and reservation systems, and the Wyndham Compliance Hotels other than 16 hotels that are expected to be completed during November 1999. To avoid any additional Year 2000 induced conflicts in its systems or introduction of additional non-compliant systems, Wyndham expects to limit any non-essential changes to its information technology systems and related equipment until after January 1, 2000. Of the 41 Third Party Compliance Hotels owned by Wyndham, the managers of 16 of those hotels have completed remediation plans and the managers of the other 25 hotels have recommended remediation plans to Wyndham and are expected to complete those plans in the fourth quarter of 1999. Of the 31 Third Party Compliance Hotels owned by third parties the owners of 26 hotels committed to effecting their own remediation, without Wyndham's involvement, and as of September 30, 1999, had informed Wyndham that 7 hotels were completed and the remaining 19 were to be completed during the fourth quarter of 1999. The third party owners of the remaining 5 Third Party Compliance Hotels have neither informed Wyndham of whether they have undertaken any remediation nor authorized Wyndham to effect any remediation on their behalf. At September 30, 1999 the 24 Third Party Compliance Hotels that were not owned by third parties which had not yet completed or informed Wyndham of their compliance efforts represent 11 percent of Wyndham's hotels (based on number of rooms). Wyndham has surveyed the Year 2000 compliance of the owners of the hotels that are franchised under the Wyndham brand but are not managed by Wyndham. Wyndham has informed those owners of the appropriate standards to make their equipment, which operates or interacts with Wyndham's systems, Year 2000 compliant. As of September 30, 1999, 5 of the 11 franchisees had informed Wyndham that their hotels were Year 2000 compliant. An additional 6 franchisees provided assurances to Wyndham that they would be in compliance prior to the end of the fourth quarter of 1999. One franchisee has yet to confirm the status of its hotel. As the systems at the franchised hotels are not under Wyndham's control, Wyndham must rely on the information provided by those owners or managers/operators and will not be able to test the assessment or remediation effected at the franchised hotels. As of September 30, 1999, Wyndham had expended or committed to expend approximately $24 million in connection with Year 2000 issues, and expects to spend an additional $6 million. Wyndham does not expect the anticipated expenditures to increase materially during the fourth quarter of 1999. As part of the settlement of litigation arising out of Wyndham's merger with Old Interstate, Wyndham agreed to contribute to a new company the management rights that were acquired in that merger, and then dispose of substantially all of that new company's stock by means of a spin-off to stockholders or otherwise. That spin-off was completed as of June 18, 1999, and Wyndham does not expect to bear any of the costs related to the inventory, assessment or remediation of those hotels. Wyndham identified the vendors and service providers critical to its businesses and requested those parties to provide information concerning their Year 2000 compliance and remediation efforts. Wyndham received responses from 59 percent of those vendors as of September 30, 1999. Based on preliminary responses, Wyndham believes that its most critical vendors and service providers will not cause Wyndham's operations to be materially disrupted as a result of Year 2000 issues. Wyndham continues to seek additional information from those parties that did not respond or did not provide sufficient information, but cannot guarantee that all vendors or service providers will comply with these requests. More importantly, Wyndham must rely on the information provided by those third parties and will not be able to test their compliance to verify the reported state of compliance. Wyndham intends to continue to evaluate the extent to which it will be able to replace vendors and service providers that are expected to be non-compliant. Considering the lack of responses from vendors and due to the lack of alternate sources, Wyndham expects it will be required to remain with potentially non-compliant vendors and service providers. In addition to those systems within Wyndham's control and the control of Wyndham's vendors and service providers, there are other systems that may impact Wyndham's business as a result of failing to become Year 2000 compliant by January 1, 2000. These systems could affect the operations of the air traffic control system and airlines or other segments of the lodging and travel industries, or the economy and travel generally. In 37 addition, the systems at the Third Party Compliance Hotels or the hotels franchised under Wyndham's brands whose owners and managers/operators are implementing their own compliance programs may fail to become Year 2000 compliant. The systems that are outside of Wyndham's control or influence could adversely affect Wyndham's financial condition, results of operations or its business reputation. Wyndham believes that the most likely consequences of Year 2000 induced failures will be local in nature and result in disruptions to utilities, transportation and food services. Wyndham has developed contingency plans to address these types of potential Year 2000 induced failures in addition to contingency plans that anticipate the failure of one or more information systems. Wyndham's contingency plans are based on existing plans for operations during storms and other natural disasters resulting in the disruption of these types of services and are intended to permit a hotel to continue its operations for a reasonable short-term period without these services. While Wyndham has developed an individualized contingency plan for each hotel it manages and operates, any disruption in utilities or other key local services could have the effect of disrupting operations of several hotels located in that geographic area, thereby eliminating the potential back-up services from another hotel and impairing the implementation of the contingency plans. Wyndham's financial condition, results of operations and its business reputation could be affected adversely as a result of Year 2000 issues if: . Wyndham's remediation efforts were unsuccessful and its contingency plans were not effective or implemented successfully . third parties' failure to become Year 2000 compliant disrupts the operation of Wyndham's hotels or decreases the demand for Wyndham's services generally . the Third Party Compliance Hotels' remediation efforts were unsuccessful . the third-party managers/operators of hotels owned by Wyndham fail to develop effective contingency plans or to implement them successfully . demand for hotel services decreases due to travelers' general concerns in regard to Year 2000 issues 38 ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS Wyndham's primary market risk exposure is to future changes in interest rates related to its derivative financial instruments and other financial instruments including debt obligations, interest rate swaps, interest rate caps, and future debt commitments. Wyndham manages its debt portfolio by periodically entering into interest rate swaps and caps to achieve an overall desired position of fixed and floating rates or to limit its exposure to rising interest rates. The following table provides information about Wyndham's derivative and other financial instruments that are sensitive to changes in interest rates. . For fixed rate debt obligations, the table presents principal cash flows and related weighted-average interest rates by expected maturity date and contracted interest rates at September 30, 1999. For variable rate debt obligations, the table presents principal cash flows by expected maturity date and contracted interest rates at September 30, 1999. . For interest rate swaps and caps, the table presents notional amounts and weighted-average interest rates or strike rates by expected (contractual) maturity dates. Notional amounts are used to calculate the contractual cash flows to be exchanged under the contract. Weighted average variable rates are based on implied forward rates in the yield curve at September 30, 1999.
Face Fair 1999 2000 2001 2002 2003 Thereafter Value Value -------- ---------- -------- -------- -------- ---------- ---------- ---------- (dollars in thousands) Debt Long-term debt obligations including Current Portion Fixed Rate............. $ 1,167 $ 33,790 $ 8,288 $ 46,092 $ 6,726 $ 335,191 $ 431,254 $ 431,254 Average Interest Rate.. 8.59% 8.68% 7.83% 8.89% 8.55% 8.17% Variable Rate.......... $ 6,588 $ 178,060 $146,102 $280,110 $ 38,078 $2,469,348 $3,118,286 $3,118,286 Average Interest Rate.. 9.09% 7.65% 7.72% 8.50% 8.30% 8.78% Interest Rate Derivative Financial Instruments.. Related to Debt........ Interest Rate Swaps Pay Fixed/Receive Variable.............. -- $ 491,603 $ 30,453 $500,000 $250,000 -- $1,272,056 $1,277,440 Average Pay Rate....... 5.94% 5.94% 5.98% 6.00% 5.84% Average Receive Rate... 5.83% 5.88% 6.36% 6.58% 6.67% Interest Rate Caps Notional Amount........ $208,750 $1,500,000 $ 57,475 -- -- $ 28,600 $1,794,825 $1,795,140 Strike Rate............ 7.39% 7.04% 7.80% 8.50% 8.50% 8.50% Forward Rate........... 5.83% 5.88% 6.36% 6.58% 6.67% 6.73%
39 PART II: OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On June 29, 1992 an action for trademark infringement was filed in the New York Supreme County of New York, Index No. 17474/92 titled Wyndham Hotel Company, John Mados, and Suzanne Mados et al v. Wyndham Hotel Company. Ltd. It is based upon the Madoses' alleged use of the mark WYNDHAM in connection with the Wyndham Hotel located in Manhattan, New York City, and operated by the Madoses since 1966 pursuant to a lease agreement entered into by the Madoses on June 1, 1957. The case was tried in May 1996, and an order and partial judgement was entered in March 1998. The order enjoins us from using the name and mark "Wyndham" in connection with the advertising, promoting, managing or operating a hotel in Manhattan, New York City, and places restrictions on Wyndham's use of the name and mark "Wyndham" in all other areas of New York outside of Manhattan. In November 1998, an order was issued clarifying the original order and a final judgment was entered. In December 1998, Wyndham appealed that judgment to the New York Supreme Court, Appellate Division, First Department. In January 1999, Wyndham moved for a stay of the injunction pending appeal which motion was granted by the Appellate Division, First Department on February 4, 1999. On May 18, 1999 the Appellate Division, First Department rendered a decision and order affirming the final judgment. On May 24, 1999, Wyndham filed a motion for permission to appeal that decision to the Court of Appeals of the State of New York. In July 1999, Wyndham received notice that the Court of Appeals of the State of New York would not hear the appeal. Patriot and Old Wyndham have received two letters dated November 11, 1998 and December 2, 1998 (the "Letters") from the counsel for the Koffman family and its affiliates (collectively, "Koffman") in connection with a Registration Rights Agreement entered into as of March 31, 1998 (the "Agreement") among Patriot, Old Wyndham and the Holders as defined therein, which such Holders include Koffman. Counsel has asserted in the Letters that, in connection with Patriot's and Old Wyndham's exercise of their "black-out" rights under the Agreement, on October 8, 1998 Patriot and Old Wyndham are in breach of their obligations to Koffman under the Agreement. Counsel has stated in the Letters that Koffman will seek relief from Patriot and Old Wyndham for any losses that Koffman may have sustained in connection with Patriot's and Old Wyndham's alleged breach of the Agreement and also have implied that Koffman may file against Patriot and Old Wyndham unspecified claims allegedly arising under the federal securities laws. If Patriot and Old Wyndham are sued, they plan to vigorously defend this lawsuit. Patriot and Old Wyndham have disclosed various matters relating to Patriot and Old Wyndham in their Form 8-K filed with the Securities and Exchange Commission on November 9, 1998 including, without limitation, an assertion by UBS AG, London Branch ("UBS") that Patriot and Old Wyndham are in default under the terms of a forward contract by and among Patriot, Old Wyndham and UBS. Patriot and Old Wyndham also have disclosed various matters in their Joint Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 26, 1999, and in registration statements on Form S-3 (filed on April 28, 1999) and Form S-4 (filed on April 14, 1999). On January 12, 1999, a putative class action lawsuit was filed on behalf of the shareholders of Patriot and Old Wyndham in the Delaware Chancery Court. This lawsuit, captioned Charles Fraschilla v. Paul A. Nussbaum, et al., No. 16895-NC, names as defendants Patriot, the then Patriot directors ("Patriot Directors"), and Apollo Real Estate Advisors, L.P., Apollo Management, L.P., The Thomas H. Lee Company, Beacon Capital Partners, Inc. and Rosen Consulting Group (collectively, the "Investors"). This lawsuit alleges, among other things, that the Patriot Directors breached their fiduciary duties to Patriot's then shareholders with respect to Patriot's financial condition and by "effectively selling control" of Patriot to the Investors for inadequate consideration and without having adequately considered or explored all other alternatives to the sale or having taken steps to maximize shareholder value; and the Investors aided and abetted the Patriot Directors in their purported breaches of fiduciary duty. In the complaint, the plaintiff seeks an injunction preventing the consummation of the deal with the Investors (which Investment now has been consummated) and monetary damages. 40 On January 19, 1999, three additional and similar putative class action lawsuits were filed in the same court by different purported class representatives: Sybil R. Meisel and Steven Langsam, Trustees v. Paul A. Nussbaum, et al., No 16905-NC; Crandon Capital Partners v. Paul A. Nussbaum, et al., No. 16906-NC; and Robert A. Staub v. Paul A. Nussbaum, et al., No. 16907-NC. The four suits since have been consolidated under the Fraschilla caption. The parties have negotiated and entered into a stipulation of settlement to settle these four putative consolidated class action lawsuits, dated on or about September 17, 1999. The Stipulation of settlement sets forth the principal bases for the settlement, which include, among other things, the modification of Wyndham's obligations to make the optional $300 million rights offering (the "Rights Offering") specified in Section 6.13 of the Securities Purchase Agreement, as follows: (a) Wyndham shall make the Rights Offering; (b) the Rights Offering shall be made no earlier than 60 days after the Closing Date, as defined in the Securities Purchase Agreement (the "Closing Date"), and shall be held open for a period of not less than 30 days, and Wyndham shall use its good faith efforts to commence the Rights Offering no later than 120 days after the Closing Date; provided, however, that Wyndham will not be required to make the Rights Offering if: (i) the SEC does not declare effective any registration statement with regard to securities of Wyndham to be offered in the Rights Offering; (ii) there is a pending court order, motion, legal proceeding or other action to enjoin, prevent or delay the Rights Offering; or (iii) the Rights Offering cannot be completed, despite Wyndham's good faith efforts, within 170 days of the Closing Date. The Stipulation of Settlement has been approved by order of the Delaware Chancery Court dated November 1, 1999. In the courts order, the Court certified, for purposes of settlement, a non- opt out, binding class of all persons and entities (exclusive of defendants and their affiliates) who owned shares of Wyndham common stock beneficially or of record, as of September 30, 1999 and/or sold shares of Patriot or Wyndham common stock during the period from January 12, 1999 to and including September 30, 1999 (the "Class"). The Court approved the settlement, including dismissing with prejudice all claims of the plaintiffs and the Class against the Defendants and others and approved an award of attorneys' fees to counsel for the plaintiffs in the amount of $1.125 million. The court order has not yet become final. On February 3, 1999, McNeill Investment Company, Inc. filed a lawsuit against Patriot in the United States District Court for the Western District of Pennsylvania. In the lawsuit, captioned McNeill Investment Company, Inc. v. Patriot American Hospitality, Inc., No 99-165, the plaintiff alleges that Patriot breached its obligations under a registration rights agreement that Patriot became obligated under through its merger transaction with Interstate Hotels Corporation. On March 26, 1999, Patriot filed an answer to the complaint in which it denied all liability. Wyndham plans to vigorously defend this lawsuit. On May 7, 1999, a putative class action lawsuit was filed in the United States District Court for the Northern District of California on behalf of former shareholders of California Jockey Club and Bay Meadows Operating Company (collectively, "Bay Meadows") who subsequently became shareholders of Patriot, Patriot American Hospitality Operating Company and Wyndham as a result of the merger (the "Merger") of the above companies on or about July 1, 1997 (the "Class"). This lawsuit, captioned Johnson, et al. v. Patriot American Hospitality, Inc. et al., C-99-2153-SI, names as defendants Patriot American Hospitality, Inc., Wyndham International, Inc., PAH GP, Inc. PAH LP, Inc., Patriot American Hospitality Partnership, L.P., Wyndham International Operating Partnership, L.P. and PaineWebber Group, Inc. This action was commenced on behalf of all former holders of Bay Meadows stock during a class period from June 2, 1997 to the date of filing (May 7, 1999). This action asserts securities fraud claims and alleges that the purported class members wrongfully were induced to tender their Bay Meadows shares as part of the Patriot/Bay Meadows merger based on a fraudulent prospectus. This action further alleges that defendants continued to defraud shareholders about their intentions to acquire numerous hotels and saddle Wyndham with massive debt during the class period. Three other actions against the same defendants subsequently were filed in the Northern District of California: (i) Ansell v. Patriot American Hospitality, Inc., et al., No. C-99-2239 (filed May 14, 1999), (ii) Sola v. Paine Webber Group, Inc., et al., No. C-99-2770 (filed June 11, 1999), and (iii) Gunderson v. Patriot American Hospitality, Inc., et al., No. C 99-3040 (filed June 23, 1999). Another action with substantially identical allegations, Susnow v. Patriot American 41 Hospitality, Inc., et al., No. 3-99-CV1354-T (filed June 15, 1999), also subsequently was filed in the Northern District of Texas. By order of the Judicial Panel on Multi-district litigation the California actions have been consolidated with the Susnow action and certain other actions listed below for consolidated pretrial purposes in the Northern District of California. To date, none of the defendants have been required to answer, move or otherwise respond to the complaints and no discovery has been taken. Wyndham plans to vigorously defend those lawsuits. On or about June 22, 1999, a putative class action lawsuit captioned Levitch v. Patriot American Hospitality, Inc., et al., No. 3-99-CV1416-D, was filed in the Northern District of Texas against Patriot, Wyndham, James D. Carreker and Paul A. Nussbaum. This action asserts securities fraud claims and alleges that, during the period from January 5, 1998 to December 17, 1998, the defendants defrauded shareholders by issuing false statements about Wyndham. The complaint was filed on behalf of all shareholders who purchased Patriot American and Wyndham stock during that period. Two actions, Gallagher v. Patriot American Hospitality, Inc., et al., No. 3-99-CV1429-L, filed on June 23, 1999, and Szekely v. Patriot American Hospitality Inc., 3-99CY1866-D filed August 23, 1999 allege substantially the same allegations and claims as mentioned above. By order of the Judicial Panel on Multi-district litigation, these actions have been consolidated with the Susnow action for consolidated pretrial purposes in the Northern District of California. To date, none of the defendants have been required to answer, move or otherwise respond to the complaints and no discovery has been taken. Wyndham plans to vigorously defend those lawsuits. On May 18, 1999, Patriot received correspondence from Deborah Szekely ("Szekely"), one of the sellers of Golden Door Spa, which Patriot purchased on May 28, 1998. In that correspondence, Szekely threatened to file a complaint sounding in securities fraud based upon allegedly misleading financial information provided to Szekely by Patriot. On May 21, 1999, Patriot received correspondence from counsel for Szekely stating that Szekely would prosecute a civil action against Patriot and related entities. Counsel enclosed a draft Tolling Agreement with that letter. Patriot and potential litigants entered into a Tolling Agreement on May 26, 1999, which extended the period for the sellers to file a complaint to June 29, 1999. The Tolling Agreement subsequently was extended to July 15, 1999 and then to August 2, 1999. Counsel has provided Patriot with a draft complaint which purports to assert claims under California state law for securities fraud, fraud in the inducement, common law fraud, breach of fiduciary duty and deceit. To the best of Patriot's knowledge, Szekely has not yet commenced that action but instead has commenced the action listed above. If a complaint is filed and served on Patriot, Patriot plans to vigorously defend this lawsuit. Patriot, a subsidiary of Patriot (the "Subsidiary"), which is the general partner of a partnership (the "Partnership") and an affiliate of the Subsidiary, which is a limited partner of the Partnership, are parties to a dispute with another limited partner of the Partnership relating to a proposed hotel development in Jacksonville, Florida. The case is captioned C&M Investors Limited v. Patriot American Hospitality, Inc. et al., originally filed in the Florida Circuit Court, Fourth Judicial Circuit, in and for Duval County, Florida, but later removed and now pending in the United States District Court, Middle District of Florida, Jacksonville Division, Civil Action No. 98-1236-Civ. J 20B. Wyndham plans to vigorously defend this lawsuit. On September 17, 1999, Starwood Hotels & Resorts Worldwide Inc. ("Starwood") filed a lawsuit against Fred J. Kleisner, Richard Mahoney and Wyndham in the United States District Court for the Southern District of New York. In the lawsuit, captioned Starwood Hotels & Resorts Worldwide Inc. v. Fred J. Kleisner et al., No. 99 Civ. 9811. The plaintiff alleged that Wyndham tortiously interfered with alleged employment contracts between Starwood and Kleisner and Mahoney, that the defendants misappropriated trade secrets belonging to Starwood, that the defendants tortiously interfered with Starwood's prospective business relationships and that the defendants are unfairly competing with Starwood. The complaint sought injunctive relief and other damages. On November 12, 1999, Starwood and Wyndham, Kleisner and Mahoney (the "Wyndham Defendants") entered into a Settlement Agreement and Mutual Release (the "Settlement Agreement") under the terms of which all claims against the Wyndham Defendants were dismissed with prejudice and the Wyndham Defendants paid no damages. Under the Settlement Agreement, Wyndham agreed to restrictions on its ability to hire and solicit for employment certain Starwood employees until July 2000. 42 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Since June 30, 1999, Wyndham International, Inc. ("Wyndham") has issued securities in private placements in reliance on an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended, in the following amounts and for the consideration set forth below. On July 1, 1999, Wyndham issued 450,000 shares of Series B convertible preferred stock to Beacon Capital Partners, L.P. ("Beacon") for $45 million. Beacon transferred its loan receivable from PAH Realty Company, LLC to Wyndham International, Inc. for the purchase of these 450,000 shares of Series B preferred stock. For the series B preferred stock, dividends are payable quarterly, on a cumulative basis, at a rate of 9.75% per year. For the first six years, the dividends are structured to ensure an aggregate fixed cash dividend payment of $29.25 million per year, so long as there is no redemption or conversion of the investors' series B preferred stock; therefore, for that period, dividends are payable partly in cash and partly in additional shares of series B preferred stock, with the cash component initially equal to 30% for the first dividend and declining over the period to approximately 19.8% for the final dividend in year six. For the next four years dividends are payable in cash or additional shares of series B preferred stock as determined by the Board of Directors; and after year 10, dividends are payable solely in cash. If any dividends are paid on the Wyndham common stock, additional dividends will be paid in the amount that would have been paid on the shares of Wyndham common stock into which the series B preferred stock is then convertible. If a change in control or a liquidation of Wyndham occurs within six years following the investment, any dividends remaining for the six years will be accelerated and paid. The series B preferred stock is not redeemable by Wyndham for six years, except that $300 million of the series B preferred stock may be redeemed during the 170 day period following the closing of the investment. The series B preferred stock can vote with the Wyndham common stock on an as-converted basis on matters submitted to the common stockholders and voting as a separate class on specified matters, with special rules applying to the election of directors. The series B preferred stock is also convertible, at the holder's option, into a number of shares of Wyndham common stock equal to $100.00 divided by the conversion price, initially equal to $8.59 but subject to potential downward adjustments. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits:
Item No. Description -------- ----------- 10.1 Executive employment agreement dated April 19, 1999 between Wyndham International, Inc. and Anne L. Raymond. 10.2 Executive employment agreement dated August 12, 1999 between Wyndham International, Inc. and Fred J. Kleisner. 10.3 Executive employment agreement dated August 18, 1999 between Wyndham International, Inc. and James D. Carreker. 10.4 Letter agreement dated July 7, 1999 between Wyndham International, Inc. and Karim Alibhai. 27.1 Financial Data Schedule--Wyndham (filed herewith).
(b) Reports on Form 8-K for the quarter ended September 30, 1999. (1) Joint Current Report on Form 8-K of Patriot American Hospitality, Inc. and Wyndham International, Inc. dated March 26, 1999 filed March 29, 1999 (Nos. 001-09319 and 001-09320), as amended May 10, 1999, May 24, 1999, and September 3, 1999 filing under Item 5 the pro forma financial information for the year ended December 31, 1998. (2) Current Report on Form 8-K of Wyndham International, Inc. dated August 19, 1999 (001-9320) reporting under Item 4, the change in its independent accountants from Ernst & Young LLP to PricewaterhouseCoopers LLP. (3) Current Report on Form 8-K of Wyndham International, Inc. dated September 17, 1999 (001-9320) reporting under Item 5, announcing the settlement of certain class action litigation and the record date for its rights offering. (4) Current Report on Form 8-K of Wyndham International, Inc. dated November 8, 1999 (001-9320) reporting under Item 5, announcing its earnings for the quarter ended September 30, 1999. 43 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized. Wyndham International, Inc. /s/ Richard Mahoney By __________________________________ Richard Mahoney Chief Financial Officer (Authorized Officer and Principal Accounting and Financial Officer) DATED: November 15, 1999 44 EX-10.1 2 EMPLOYMENT AGREEMENT ANNE RAYMOND EXHIBIT 10.1 EXECUTIVE EMPLOYMENT AGREEMENT AS AMENDED AND RESTATED This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made as of the 19th day of April, 1999, between Wyndham International, Inc., a Delaware corporation (the "Company"), and Anne L. Raymond ("Executive"). WHEREAS, Executive is currently employed by the Company in a senior executive capacity; WHEREAS, the Company desires to continue to employ Executive and Executive desires to continue to be employed by the Company; WHEREAS, the Company and Executive desire to amend and restate Executive's existing Executive Employment Agreement with the Company to make certain changes therein and to eliminate the requirement of an escrow arrangement upon a Change in Control of the Company; WHEREAS, the Company and Executive acknowledge that regardless of the provisions of Paragraph 8 of this amended and restated Agreement, upon the closing of the Securities Purchase Agreement by and among Patriot American Hospitality, Inc., Wyndham International, Inc., Patriot American Hospitality, L.P. and the Investors named therein, all options and other stock-based awards granted to Executive prior to the date of this Agreement shall immediately accelerate and become exercisable or non-forfeitable as of such date; WHEREAS, as an additional inducement to Executive to enter into this amended and restated Agreement, the Company shall, on the Commencement Date (as hereinafter defined), grant Executive an option to purchase a certain number of Paired Shares of common stock of the Company and of common stock of Patriot American Hospitality, Inc. as set forth in the agreement attached hereto as Exhibit A (the "Option") and to enter into a new promissory note attached hereto as Exhibit B (the "Note"); and WHEREAS, Executive is desirous of committing to serve the Company on the terms herein provided. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Employment. The term of this Agreement shall extend from the date hereof (the "Commencement Date") until the third anniversary of the Commencement Date; provided, however, that the term of this Agreement shall automatically be extended for one additional year on the third anniversary of the Commencement Date and each anniversary thereafter unless, not less than 90 days prior to each such date, either party shall have given notice to the other that it does not wish to extend this Agreement; provided, further, that if a Change in Control occurs during the original or extended term of this Agreement, the term of this Agreement shall continue in effect for a period of not less than eighteen (18) months beyond the month in which the Change in Control occurred. The term of this Agreement shall be subject to termination as provided in Paragraph 6 and may be referred to herein as the "Period of Employment." 2. Position and Duties. During the Period of Employment, Executive shall serve as an Executive Vice President and Chief Investment Officer of the Company, shall have supervision and control over and responsibility for the day-to-day business and affairs of those functions and operations of the Company and shall have such other powers and duties as may from time to time be prescribed by the Chairman of the Board of the Company (the "Chairman") or the Chief Executive Officer of the Company (the "CEO") or other executive authorized by the Chairman or CEO, provided that such duties are consistent with Executive's position or other positions that he may hold from time to time. Executive shall devote his full working time and efforts to the business and affairs of the Company. Notwithstanding the foregoing, Executive may serve on other boards of directors, with the approval of the Chairman or CEO, or engage in religious, charitable or other community activities as long as such services and activities are disclosed to the Chairman or CEO and do not materially interfere with Executive's performance of his duties to the Company as provided in this Agreement. 3. Compensation and Related Matters. (a) Base Salary and Incentive Compensation. Executive's initial annual base salary ("Base Salary") shall be $325,000.00. Effective July 1, 1999, Base Salary shall be adjusted to $350,000.00. Executive's Base Salary shall be redetermined at least thirty (30) days before each annual compensation determination date established by the Company during the Period of Employment in an amount to be fixed by the Board of Directors of the Company or a Committee thereof or a duly authorized officer (the "Board"). The Base Salary, as redetermined, may be referred to herein as "Adjusted Base Salary." The Base Salary or Adjusted Base Salary shall be payable in substantially equal bi-weekly installments and shall in no way limit or reduce the obligations of the Company hereunder. In addition to Base Salary or Adjusted Base Salary, Executive shall be eligible to receive cash incentive compensation as determined by the Board from time to time, and shall also be eligible to participate in such incentive compensation plans as the Board shall determine from time to time for employees of the same status within the hierarchy of the Company. (b) Expenses. Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him (in accordance with the policies and procedures then in effect and established by the Company for its senior executive officers) in performing services hereunder during the Period of Employment, provided that Executive properly accounts therefor in accordance with Company policy. (c) Other Benefits. During the Period of Employment, Executive shall be entitled to continue to participate in or receive benefits under all of the Company's Employee Benefit 2 Plans in effect on the date hereof, or under plans or arrangements that provide Executive with at least substantially equivalent benefits to those provided under such Employee Benefit Plans. As used herein, "Employee Benefit Plans" include, without limitation, each pension and retirement plan; supplemental pension, retirement and deferred compensation plan; savings and profit-sharing plan; stock ownership plan; stock purchase plan; stock option plan; life insurance plan; medical insurance plan; disability plan; and health and accident plan or arrangement established and maintained by the Company on the date hereof for employees of the same status within the hierarchy of the Company. To the extent that the scope or nature of benefits described in this section are determined under the policies of the Company based in whole or in part on the seniority or tenure of an employee's service, Executive shall be deemed to have a tenure with the Company equal to the actual time of Executive's service with Company. During the Period of Employment, Executive shall be entitled to participate in or receive benefits under any employee benefit plan or arrangement which may, in the future, be made available by the Company to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plan or arrangement. Any payments or benefits payable to Executive under a plan or arrangement referred to in this Subparagraph 3(c) in respect of any calendar year during which Executive is employed by the Company for less than the whole of such year shall, unless otherwise provided in the applicable plan or arrangement, be prorated in accordance with the number of days in such calendar year during which he is so employed. Should any such payments or benefits accrue on a fiscal (rather than calendar) year, then the proration in the preceding sentence shall be on the basis of a fiscal year rather than calendar year. (d) Life Insurance. The Company shall pay the premiums on, and maintain in effect throughout the Period of Employment, a life insurance policy on the life of Executive in an amount not less than the amount of Executive's then current Base Salary or Adjusted Base Salary. Executive shall have the right to designate the beneficiary under such policy. (e) Vacations. Executive shall be entitled to the number of paid vacation days in each calendar year determined by the Company from time to time for executives at the same level as Executive. Executive shall also be entitled to all paid holidays given by the Company to its executives. To the extent that the scope or nature of benefits described in this section are determined under the policies of the Company based in whole or in part on the seniority or tenure of an employee's service, Executive shall be deemed to have a tenure with the Company equal to the actual time of Executive's service with Company. (f) Disability Insurance. The Company shall pay the premiums on, and maintain in effect through the Period of Employment, long-term disability insurance providing for payment of benefits at rates not less than sixty percent (60%) of Executive's current Base Salary or Adjusted Base Salary. (g) Tax Loan. Upon the maturity of the Note, if Executive is still employed by the Company, the Company shall provide Executive with a loan (the "Tax Loan") in an amount sufficient to enable Executive to pay taxes due upon the maturity of the Note. The Tax Loan 3 shall (i) be personal recourse, (ii) have a term of four (4) years, (iii) bear interest at (a) six percent (6%) per annum, compounded annually from the date of making the Tax Loan through April 18, 2002 and (b) from and after April 19, 2002, shall be at the Company's revolver interest rate, and (iv) require Executive to prepay with fifty percent (50%) of the net after-tax proceeds of the sale of any shares of stock of the Company acquired through option exercises and with twenty-five percent (25%) of the net after-tax amount of any bonus payment from the Company. 4. Unauthorized Disclosure. (a) Confidential Information. Executive acknowledges that in the course of his employment with the Company (and, if applicable, its predecessors), he has been allowed to become, and will continue to be allowed to become, acquainted with the Company's business affairs, information, trade secrets, and other matters which are of a proprietary or confidential nature, including but not limited to the Company's and its predecessors' operations, business opportunities, price and cost information, finance, customer information, business plans, various sales techniques, manuals, letters, notebooks, procedures, reports, products, processes, services, and other confidential information and knowledge (collectively the "Confidential Information") concerning the Company's and its predecessors' business. The Company agrees to provide on an ongoing basis such Confidential Information as the Company deems necessary or desirable to aid Executive in the performance of his duties. Executive understands and acknowledges that such Confidential Information is confidential, and he agrees not to disclose such Confidential Information to anyone outside the Company except to the extent that (i) Executive deems such disclosure or use reasonably necessary or appropriate in connection with performing his duties on behalf of the Company, (ii) Executive is required by order of a court of competent jurisdiction (by subpoena or similar process) to disclose or discuss any Confidential Information, provided that in such case, Executive shall promptly inform the Company of such event, shall cooperate with the Company in attempting to obtain a protective order or to otherwise restrict such disclosure, and shall only disclose Confidential Information to the minimum extent necessary to comply with any such court order; (iii) such Confidential Information becomes generally known to and available for use by the hotel and hospitality industry (the "Hotel Industry"), other than as a result of any action or inaction by Executive; or (iv) such information has been rightfully received by a member of the Hotel Industry or has been published in a form generally available to the Hotel Industry prior to the date Executive proposes to disclose or use such information. Executive further agrees that he will not during employment and/or at any time thereafter use such Confidential Information in competing, directly or indirectly, with the Company. At such time as Executive shall cease to be employed by the Company, he will immediately turn over to the Company all Confidential Information, including papers, documents, writings, electronically stored information, other property, and all copies of them provided to or created by him during the course of his employment with the Company. 4 (b) Heirs, successors, and legal representatives. The foregoing provisions of this Paragraph 4 shall be binding upon Executive's heirs, successors, and legal representatives. The provisions of this Paragraph 4 shall survive the termination of this Agreement for any reason. 5. Covenant Not to Compete. In consideration for the Option and the Loan and for Executive' s employment by the Company under the terms provided in this Agreement and as a means to aid in the performance and enforcement of the terms of the Unauthorized Disclosure provisions of Paragraph 4, Executive agrees that (a) during the term of Executive's employment with the Company and for a period of twenty-four (24) months thereafter, regardless of the reason for termination of employment, Executive will not, directly or indirectly, as an owner, director, principal, agent, officer, employee, partner, consultant, servant, or otherwise, carry on, operate, manage, control, or become involved in any manner with any business, operation, corporation, partnership, association, agency, or other person or entity which is in the business of owning, operating, managing or granting franchise rights with respect to hotels, motels or other lodging facilities in any area or territory in which the Company conducts operations; provided, however, that the foregoing shall not prohibit Executive from owning up to one percent (1%) of the outstanding stock of a publicly held company engaged in the hospitality business. Notwithstanding the foregoing, Executive shall be permitted to engage in such activities with respect to any other hotel, motel or lodging facility that would be immaterial to the operations of the Company in the area or territory in question. Immateriality, for purposes of the foregoing sentence, shall be determined in the sole discretion of the Board in good faith. (b) during the term of Executive's employment with the Company and for a period of twenty-four (24) months thereafter, regardless of the reason for termination of employment, Executive will not, directly or indirectly, either for himself or for any other business, operation, corporation, partnership, association, agency, or other person or entity, call upon, compete for, solicit, divert, or take away, or attempt to divert or take away any of the customers (including, without limitation, any hotel owner, lessor or lessee, asset manager, trustee, consumer with whom the Company from time to time (i) has an existing agreement or business relationship; or (ii) has included as a prospect in its applicable pipeline) or vendors of the Company in any of the areas or territories in which the Company conducts operations if such action has the intent or effect of interfering with the Company's relationship with the vendor or customer. (c) during the term of Executive's employment with the Company and for a period of twenty-four (24) months thereafter, regardless of the reason for termination of employment, Executive will not directly or indirectly solicit or induce any present or future employee of the Company to accept employment with Executive or with any business, operation, corporation, partnership, association, agency, or other person or entity with which Executive may be associated, and Executive will not employ or cause any business, operation, corporation, partnership, association, agency, or other person or entity with which Executive may be 5 associated to employ any present or future employee of the Company without providing the Company with ten (10) days' prior written notice of such proposed employment. Should Executive violate the provisions of this Paragraph, then in addition to all other rights and remedies available to the Company at law or in equity, the duration of this covenant shall automatically be extended for the period of time from which Executive began such violation until he permanently ceases such violation. 6. Termination. Executive's employment hereunder may be terminated without any breach of this Agreement under the following circumstances: (a) Death. Executive's employment hereunder shall terminate upon his death. (b) Disability. If, as a result of Executive's incapacity due to physical or mental illness, Executive shall have been absent from his duties hereunder on a full-time basis for one hundred eighty (180) calendar days in the aggregate in any twelve (12) month period, the Company may terminate Executive's employment hereunder. (c) Termination by Company For Cause. At any time during the Period of Employment, the Company may terminate Executive's employment hereunder for Cause if such termination is approved by not less than a majority of the Board of Directors of the Company at a meeting of such Board of Directors called and held for such purpose. For purposes of this Agreement "Cause" shall mean: (A) conduct by Executive constituting a material act of willful misconduct in connection with the performance of his duties, including, without limitation, misappropriation of funds or property of the Company or any of its affiliates other than the occasional, customary and de minimis use of Company property for personal purposes; (B) criminal or civil conviction of Executive, a plea of nob contendere by Executive or conduct by Executive that would reasonably be expected to result in material injury to the reputation of the Company if he were retained in his position with the Company, including, without limitation, conviction of a felony involving moral turpitude; (C) continued, willful and deliberate non-performance by Executive of his duties hereunder (other than by reason of Executive's physical or mental illness, incapacity or disability) and such non-performance has continued for more than thirty (30) days following written notice of such non-performance from the Board; (D) a breach by Executive of any of the provisions contained in Paragraphs 4 and 5 of this Agreement; or (E) a violation by Executive of the Company's employment policies and such violation has continued following written notice of such violation from the Board. (d) Termination Without Cause. At any time during the Period of Employment, the Company may terminate Executive's employment hereunder without Cause if such termination is approved by a majority of the Board at a meeting of the Board called and held for such purpose. Any termination by the Company of Executive's employment under this Agreement which does not constitute a termination for Cause under Subparagraph 6(c) or result from the death or disability of the Executive under Subparagraph 6(a) or (b) shall be 6 deemed a termination without Cause. If the Company provides notice to the Executive under Paragraph 1 that it does not wish to extend the Period of Employment, such action shall be deemed a termination without Cause. (e) Termination by Executive. At any time during the Period of Employment, Executive may terminate his employment hereunder for any reason, including but not limited to Good Reason. If Executive provides notice to the Company under Paragraph 1 that he does not wish to extend the Period of Employment, such action shall be deemed a voluntary termination by Executive and one without Good Reason. For purposes of this Agreement, "Good Reason" shall mean that Executive has complied with the "Good Reason Process" (hereinafter defined) following the occurrence of any of the following events: (A) a substantial diminution or other substantive adverse change, not consented to by Executive, in the nature or scope of Executive's responsibilities, authorities, powers, functions or duties, other than a change in Executive's position or reporting relationship; (B) any removal, during the Period of Employment, from Executive of his title of Executive Vice President; (C) an involuntary reduction in Executive's Base Salary or Adjusted Base Salary or involuntary reduction in cash incentive compensation plan (but not reduction in incentive compensation appropriate for level of performance) except for across-the-board salary reductions similarly affecting all or substantially all management employees; (D) a breach by the Company of any of its other material obligations under this Agreement and the failure of the Company to cure such breach within thirty (30) days after written notice thereof by Executive; (E) the involuntary relocation of the Company's offices at which Executive is principally employed or the involuntary relocation of the offices of Executive's primary workgroup to a location more than thirty (30) miles from such offices (other than a relocation in either event to Dallas, Texas), or the requirement by the Company for Executive to be based anywhere other than the Company's offices at such location or in Dallas, Texas on an extended basis, except for required travel on the Company's business to an extent substantially consistent with Executive's business travel obligations; or (F) the requirement that Executive report to a person who is below the level of an Executive Vice President. "Good Reason Process" shall mean that (i) the Executive reasonably determines in good faith that a "Good Reason" event has occurred; (ii) Executive notifies the Company in writing of the occurrence of the Good Reason event; (iii) Executive cooperates in good faith with the Company's efforts, for a period not less than ninety (90) days following such notice, to modify Executive's employment situation in a manner acceptable to Executive and Company; and (iv) notwithstanding such efforts, one or more of the Good Reason events continues to exist and has not been modified in a manner acceptable to Executive. If the Company cures the Good Reason event during the ninety (90) day period, Good Reason shall be deemed not to have occurred. (f) Notice of Termination. Except for termination as specified in Subparagraph 6(a), any termination of Executive's employment by the Company or any such termination by Executive shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon. 7 (g) Date of Termination. "Date of Termination" shall mean: (A) if Executive's employment is terminated by his death, the date of his death; (B) if Executive's employment is terminated on account of disability under Subparagraph 6(b) or by the Company for Cause under Subparagraph 6(c), the date on which Notice of Termination is given; (C) if Executive's employment is terminated by the Company under Subparagraph 6(d), sixty (60) days after the date on which a Notice of Termination is given; and (D) if Executive's employment is terminated by Executive under Subparagraph 6(e), thirty (30) days after the date on which a Notice of Termination is given. 7. Compensation Upon Termination or During Disability. (a) If Executive's employment terminates by reason of his death, the Company shall, within ninety (90) days of death, pay in a lump sum amount to such person as Executive shall designate in a notice filed with the Company or, if no such person is designated, to Executive's estate, Executive's accrued and unpaid Base Salary or, if applicable, his Adjusted Base Salary, to the date of his death, plus his accrued and unpaid incentive compensation, if any, under Subparagraph 3(a). For a period of one (1) year following the Date of Termination, the Company shall pay such health insurance premiums as may be necessary to allow Executive's spouse and dependents to receive health insurance coverage substantially similar to coverage they received prior to the Date of Termination. In addition to the foregoing, any payments to which Executive's spouse, beneficiaries, or estate may be entitled under any employee benefit plan shall also be paid in accordance with the terms of such plan or arrangement. Such payments, in the aggregate, shall fully discharge the Company's obligations hereunder. (b) During any period that Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness, Executive shall continue to receive his accrued and unpaid Base Salary or, if applicable, his Adjusted Base Salary and accrued and unpaid incentive compensation payments, if any, under Subparagraph 3(a), until Executive's employment is terminated due to disability in accordance with Subparagraph 6(b) or until Executive terminates his employment in accordance with Subparagraph 6(e), whichever first occurs. For a period of one (1) year following the Date of Termination, the Company shall pay such health insurance premiums as may be necessary to allow Executive, Executive's spouse and dependents to receive health insurance coverage substantially similar to coverage they received prior to the Date of Termination. Upon termination due to death prior to the termination first to occur as specified in the preceding sentence, Subparagraph 7(a) shall apply. (c) If Executive's employment is terminated by Executive other than for Good Reason as provided in Subparagraph 6(e), then the Company shall, through the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if applicable, his Adjusted Base Salary at the rate in effect at the time Notice of Termination is given. Thereafter, the Company shall have no further obligations to Executive except as otherwise expressly provided under this Agreement, provided any such termination shall not adversely affect or alter Executive's rights under any employee benefit plan of the Company in which Executive, at the 8 Date of Termination, has a vested interest, unless otherwise provided in such employee benefit plan or any agreement or other instrument attendant thereto. (d) If Executive terminates his employment for Good Reason as provided in Subparagraph 6(e) or if Executive's employment is terminated by the Company without Cause as provided in Subparagraph 6(d), then the Company shall, through the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if applicable, his Adjusted Base Salary at the rate in effect at the time Notice of Termination is given and his accrued and unpaid incentive compensation, if any, under Subparagraph 3(a). In addition, subject to signing by Executive of a general release of claims in a form and manner satisfactory to the Company, (i) the Company shall continue Executive's compensation at a rate equal to the sum of Executive's Average Base Salary and his Average Incentive Compensation payable for the remaining length of the Period of Employment after the Date of Termination (the "Severance Amount"), but in no event for fewer than twenty-four (24) months. The Severance Amount shall be paid out in substantially equal bi-weekly installments, in arrears; provided, however, that in the event Executive commences any employment during such period, the Company shall be entitled to set-off against the remaining Severance Amount seventy-five percent (75%) of the amount of any cash compensation received by Executive from the new employer. From time to time, Executive may be asked to certify to the Company that he has not accepted employment with a new employer (including, without limitation, contract and consulting agreements). For purposes of this Agreement, "Average Base Salary" shall mean the average of the annual Base Salary or, if applicable, Adjusted Base Salary received by Executive for each of the three (3) immediately preceding fiscal years or such fewer number of complete fiscal years as Executive may have been employed by the Company. For purposes of this Agreement, "Average Incentive Compensation" shall mean the average of the annual incentive compensation under Subparagraph 3(a) received by Executive for the three (3) immediately preceding fiscal years or such fewer number of complete fiscal years as Executive may have been employed by the Company. In no event shall "Average Incentive Compensation" include any sign-on bonus, retention bonus or any other special bonus. Notwithstanding the foregoing, if the Executive breaches any of the provisions contained in Paragraphs 4 and 5 of this Agreement, all payments of the Severance Amount shall immediately cease. Notwithstanding the foregoing, in the event Executive terminates his employment for Good Reason as provided in Subparagraph 6(e), he shall be entitled to the Severance Amount only if he provides the Notice of Termination provided for in Subparagraph 6(f) within thirty (30) days after the occurrence of the event or events which constitute such Good Reason as specified in clauses (A), (B), (C), (D) (E) and (F) of Subparagraph 6(e); (ii) in addition to any other benefits to which Executive may be entitled in accordance with the Company's then existing severance policies, the Company shall, for a period of one (1) year commencing on the Date of Termination, pay such health 9 insurance premiums as may be necessary to allow Executive, Executive's spouse and dependents to continue to receive health insurance coverage substantially similar to the coverage they received prior to his termination of employment. (e) If Executive's employment is terminated by the Company for Cause as provided in Subparagraph 6(c), then the Company shall, through the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if applicable, his Adjusted Base Salary at the rate in effect at the time Notice of Termination is given. Thereafter, the Company shall have no further obligations to Executive except as otherwise expressly provided under this Agreement, provided any such termination shall not adversely affect or alter Executive's rights under any employee benefit plan of the Company in which Executive, at the Date of Termination, has a vested interest, unless otherwise provided in such employee benefit plan or any agreement or other instrument attendant thereto. (f) Regardless of the reason for termination, for a period of five (5) years beginning on the Date of Termination, the Company will provide such reasonable assistance and support to Executive as he shall reasonably require in connection with the preparation and filing of tax returns, statements and forms insofar as such returns, statements or forms relate to Executive's association with the Company or any of its predecessors or affiliates. At the Company's election, such assistance and support shall be provided by either tax personnel from the Company or certified public accountants selected and compensated by the Company. (g) Nothing contained in the foregoing Subparagraphs 7(a) through 7(f) shall be construed so as to affect Executive's rights or the Company's obligations relating to agreements or benefits which are unrelated to termination of employment. 8. Change in Control Payment. The provisions of this Paragraph 8 set forth certain terms of an agreement reached between Executive and the Company regarding Executive's rights and obligations upon the occurrence of a Change in Control of the Company. These provisions are intended to assure and encourage in advance Executive's continued attention and dedication to his assigned duties and his objectivity during the pendency and after the occurrence of any such event. These provisions shall apply in lieu of, and expressly supersede, the provisions of Subparagraph 7(d)(i) regarding severance pay upon a termination of employment, if such termination of employment occurs within eighteen (18) months after the occurrence of the first event constituting a Change of Control; provided that such first event occurs during the Period of Employment. These provisions shall terminate and be of no further force or effect beginning eighteen (18) months after the occurrence of a Change of Control. (a) Change in Control. (i) If within eighteen (18) months after the occurrence of the first event constituting a Change in Control, Executive's employment is terminated by the Company without Cause as provided in Subparagraph 6(d) or Executive terminates his employment for Good Reason as provided in Subparagraph 6(e), then the Company shall pay Executive the Severance Amount as provided in Subparagraph 7(d)(i) in 10 substantially bi-weekly installments, in arrears, over twenty-four (24) months. Notwithstanding the foregoing, if the Executive breaches any of the provisions contained in Paragraphs 4 and 5 of this Agreement, all payments of the Severance Amount shall immediately cease; and (ii) Within fifteen (15) days after Executive becomes entitled to receive the Severance Amount under (i) above, the Company shall place funds in an amount equal to the estimated Severance Amount in escrow, pursuant to arrangements that are mutually acceptable to the Company and Executive (the "Escrow Arrangement"). The Escrow Arrangement shall be maintained until the final installment payment of the Severance Amount has been made; (iii) Notwithstanding anything to the contrary in any applicable option agreement or stock-based award agreement, if Executive terminates his employment for Good Reason as provided in Subparagraph 6(e) or if Executive's employment is terminated by the Company without Cause as provided in Subparagraph 6(d) within eighteen (18) months of a Change in Control, all stock options and other stock-based awards granted to Executive by the Company shall immediately accelerate and become exercisable or non-forfeitable as of the Date of Termination, and Executive shall have 360 days to exercise all his stock options. Executive shall also be entitled to any other rights and benefits with respect to stock-related awards, to the extent and upon the terms provided in the employee stock option or incentive plan or any agreement or other instrument attendant thereto pursuant to which such options or awards were granted; and (iv) The Company shall, for a period of one (1) year commencing on the Date of Termination, pay such health insurance premiums as may be necessary to allow Executive, Executive's spouse and dependents to continue to receive health insurance coverage substantially similar to the coverage they received prior to his termination of employment. (b) Gross Up Payment. (i) Excess Parachute Payment. If Executive incurs the tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986 (the "Code") on "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code, the Company will pay to Executive an amount (the "Gross Up Payment") such that the net amount retained by Executive, after deduction of any Excise Tax on the excess parachute payment and any federal, state and local income taxes and employment taxes (together with penalties and interest) and Excise Tax upon the payment provided for by this Subparagraph 8(c)(i), will be equal to the Severance Amount. (ii) Applicable Rates. For purposes of determining the amount of the Gross Up Payment, Executive will be deemed to pay federal income taxes at the highest 11 marginal rate of federal income taxation in the calendar year in which the Gross Up Payment is to be made and state and local income taxes at the highest marginal rates of taxation in the state and locality of Executive's residence on the date of Executive's Termination, net of the maximum reduction in federal income taxes that could be obtained from deduction of such state and local taxes. (iii) Detennination of Gross Up Payment Amount. The determination of whether the Excise Tax is payable and the amount thereof will be based upon the opinion of tax counsel selected by Executive and approved by the Company, which approval will not be unreasonably withheld. If such opinion is not finally accepted by the Internal Revenue Service (or state and local taxing authorities), then appropriate adjustments to the Excise Tax will be computed and additional Gross Up Payments will be made in the manner provided by this Subparagraph (c). (iv) Time For Payment. The Company will pay the estimated amount of the Gross Up Payment in cash to Executive at such time or times when the Excise Tax is due. Executive and the Company agree to reasonably cooperate in the determination of the actual amount of the Gross Up Payment. Further, Executive and the Company agree to make such adjustments to the estimated amount of the Gross Up Payment as may be necessary to equal the actual amount of the Gross Up Payment, which in the case of Executive will refer to refunds of prior overpayments and in the case of the Company will refer to makeup of prior underpayments. (c) Definitions. For purposes of this Paragraph 8, the following terms shall have the following meanings: "Change in Control" shall mean any of the following: (a) the acquisition by any individual, entity or group (within the meaning of Section 1 3(d)(3) or 14(d)(2) of the Exchange Act) (the "Acquiring Person"), other than the Company, or any of its Subsidiaries or any Investor or Excluded Group, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the combined voting power or economic interests of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, that any transfer from any Investor or Excluded Group will not result in a Change in Control if such transfer was part of a series of related transactions the effect of which, absent the transfer to such Acquiring Person by the Investor or Excluded Group, would not have resulted in the acquisition by such Acquiring Person of 35% or more of the combined voting power or economic interests of the then outstanding voting securities; or (b) during any period of 12 consecutive months after the Issuance Date, the individuals who at the beginning of any such 12-month period constituted a majority of the Class A Directors and Class C Directors (the "Incumbent Non-Investor Majority") 12 cease for any reason to constitute at least a majority of such Class A Directors and Class C Directors; provided that (i) any individual becoming a director whose election, or nomination for election by the Company's stockholders, was approved by a vote of the stockholders having the right to designate such director and (ii) any director whose election to the Board or whose nomination for election by the stockholders of the Company was approved by the requisite vote of directors entitled to vote on such election or nomination in accordance with the Restated Certificate of Incorporation of the Company, shall, in each such case, be considered as though such individual were a member of the Incumbent Non-Investor Majority, but excluding, as a member of the Incumbent Non-Investor Majority, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company (as such terms are used in Rule 14a-1 1 of Regulation 14A promulgated under the Exchange Act) and further excluding any person who is an affiliate or associate of an Acquiring Person having or proposing to acquire beneficial ownership of 25% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; or (c) the approval by the stockholders of the Company of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the voting securities of the Company immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 57.5% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Company resulting from such reorganization, merger or consolidation; or (d) the sale or other disposition of assets representing 50% or more of the assets of the Company in one transaction or series of related transactions. All defined terms used in the definition of "Change in Control" shall have the same meaning as set forth in the Form of Certificate of Designation of Series B Convertible Preferred Stock of Wyndham International, Inc. "Company" shall mean not only Wyndham International, Inc., but also its successors by merger or otherwise. 9. Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed as follows: 13 if to the Executive: At his home address as shown in the Company's personnel records; if to the Company: Wyndham International, Inc. 1950 Stemmons Freeway Suite 6001 Dallas, TX 75207 Attention: Senior Vice President of Human Resources and General Counsel or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 10. Miscellaneous. No provisions of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by Executive and such officer of the Company as may be specifically designated by the Board. No waiver by either party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, unless specifically referred to herein, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of Texas (without regard to principles of conflicts of laws). 11. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. The invalid portion of this Agreement, if any, shall be modified by any court having jurisdiction to the extent necessary to render such portion enforceable. 12. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 13. Arbitration; Other Disputes. In the event of any dispute or controversy arising under or in connection with this Agreement, the parties shall first promptly try in good faith to settle such dispute or controversy by mediation under the applicable rules of the American Arbitration Association before resorting to arbitration. In the event such dispute or controversy remains unresolved in whole or in part for a period of thirty (30) days after it 14 arises, the parties will settle any remaining dispute or controversy exclusively by arbitration in Dallas, Texas, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. Notwithstanding the above, the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of Paragraph 4 or 5 hereof. Furthermore, should a dispute occur concerning Executive's mental or physical capacity as described in Subparagraph 6(b), 6(c) or 7(b), a doctor selected by Executive and a doctor selected by the Company shall be entitled to examine Executive. If the opinion of the Company's doctor and Executive's doctor conflict, the Company's doctor and Executive's doctor shall together agree upon a third doctor, whose opinion shall be binding. Any amount to which Executive is entitled under this Agreement (including any disputed amount), which is not paid when due, shall bear interest at a rate equal to the lesser of eighteen percent (18%) per annum or the maximum lawful rate. 14. Third-Party Agreements and Rights. Executive represents to the Company that Executive's execution of this Agreement, Executive's employment with the Company and the performance of Executive's proposed duties for the Company will not violate any obligations Executive may have to any employer or other party, and Executive will not bring to the premises of the Company any copies or other tangible embodiments of non-public information belonging to or obtained from any such previous employment or other party. 15. Litigation and Regulatory Cooperation. During and after Executive's employment, Executive shall reasonably cooperate with the Company in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while Executive was employed by the Company; provided, however, that such cooperation shall not materially and adversely affect Executive or expose Executive to an increased probability of civil or criminal litigation. Executive's cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times. During and after Executive' s employment, Executive also shall cooperate fully with the Company in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while Executive was employed by the Company. The Company shall also provide Executive with compensation on an hourly basis (to be derived from the sum of his Base Compensation or, if applicable, Adjusted Base Salary and Average Incentive Compensation) for requested litigation and regulatory cooperation that occurs after his termination of employment, and reimburse Executive for all costs and expenses incurred in connection with his performance under this Paragraph 15, including, but not limited to, reasonable attorneys' fees and costs. 16. Gender Neutral. Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise. 15 IN WITNESS WHEREOF, the parties have executed this Agreement effective on the date and year first above written. WYNDHAM INTERNATIONAL, INC. By: ---------------------------------------- Its: Chairman and Chief Executive Officer /s/ Anne L. Raymond ---------------------------------------- Anne L. Raymond 16 EX-10.2 3 EMPLOYMENT AGREEMENT WITH FRED KLEISNER EXHIBIT 10.2 EXECUTIVE EMPLOYMENT AGREEMENT This EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made as of the 12th day of August, 1999, between Wyndham International, Inc., a Delaware corporation (the "Company"), and Fred J. Kleisner ("Executive"), but it shall become effective only on the date set forth in Paragraph 19 below (the "Effective Date"). WHEREAS, the Company desires to employ Executive as its President and Chief Operating Officer; and WHEREAS, as an additional inducement to Executive to enter into this Agreement, the Company shall, on the Effective Date, (a) pay to Executive a signing bonus of $550,000.00, (b) aid Executive in the purchase of a Dallas residence, up to and including a bridge loan, (c) grant Executive an option to purchase a certain number of shares of Class A Common Stock of the Company, as set forth in the agreement attached hereto as Exhibit A (the "Option"), (d) grant Executive a certain number of shares of Class A Common Stock of the Company as set forth in the agreement attached hereto as Exhibit B (the "Stock Grant"); and (e) enter into a promissory note in the form attached hereto as Exhibit C (the "Note"); and WHEREAS, Executive desires to be employed by the Company on the terms herein provided. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Employment. The term of this Agreement shall extend from the Effective Date until the third anniversary of the Effective Date; provided, however, that the term of this Agreement shall automatically be extended for one additional year on the third anniversary of the Effective Date and each anniversary thereafter unless, not less than 90 days prior to each such date, either party shall have given notice to the other that it does not wish to extend this Agreement; provided, further, that if a Change in Control occurs during the original or extended term of this Agreement, the term of this Agreement shall continue in effect for a period of not less than eighteen (18) months beyond the month in which the Change in Control occurred. The term of this Agreement shall be subject to termination as provided in Paragraph 7 and may be referred to herein as the "Period of Employment." 2. Position and Duties. During the Period of Employment, Executive shall serve as President and Chief Operating Officer of the Company, shall have supervision and control over and responsibility for the day-to-day business and affairs of those functions and operations of the Company and shall have such other powers and duties as may from time to time be prescribed by the Chairman of the Board of the Company (the "Chairman") or the Chief Executive Officer of the Company (the "CEO"), provided that such duties are consistent with the normal and customary duties of the Executive's position or other positions that he may hold from time to time. Executive shall devote his full working time and efforts to the business and affairs of the 1 Company. Notwithstanding the foregoing, Executive may serve on other boards of directors, with the approval of the Chairman or CEO, or engage in religious, charitable or other community activities as long as such services and activities are disclosed to the Chairman or CEO and do not materially interfere with Executive's performance of his duties to the Company as provided in this Agreement. 3. Compensation and Related Matters. (a) Base Salary. Executive's initial annual base salary ("Base Salary") shall be $550,000.00. Thereafter, Executive's Base Salary shall be redetermined at least thirty (30) days before each annual compensation determination date established by the Company during the Period of Employment but in any event not later than the first quarter of the applicable fiscal year (the "Annual Compensation Determination Date") in an amount to be fixed by the Board of Directors (the "Board") based upon merit, but in no event shall such re- determined Base Salary be less than $550,000.00. The Base Salary, as redetermined, is referred to herein as the "Adjusted Base Salary." The Base Salary or, if applicable, the Adjusted Base Salary, shall be payable in substantially equal bi-weekly installments. (b) Incentive Compensation. In addition to Base Salary or, if applicable, Adjusted Base Salary, Executive shall be eligible to receive in each fiscal year during the Period of Employment, on or about the Annual Compensation Determination Date (or earlier as provided in Paragraph 8 and 9 of this Agreement), cash incentive compensation (the "Incentive Compensation") in an amount determined annually by the Compensation Committee of the Board based on individual performance, "Employer EBITDA Achievement" (as hereinafter defined), and total return to shareholders. Incentive Compensation shall equal from zero to two times the then current Base Salary or, if applicable, Adjusted Base Salary. "Employer EBITDA Achievement" is the degree to which the annual budget established by Employer for earnings before interest, taxes, depreciation, and amortization is achieved. Incentive Compensation shall equal at least $750,000.00 for the remainder of 1999, which shall be payable to Executive not later than March 31, 2000. Thereafter, Incentive Compensation shall be targeted at a minimum of 100% of the Base Salary or, if applicable, Adjusted Base Salary for any year in which Employer EBITDA Achievement is one hundred percent (100%) or more ("Target Incentive Compensation"). The Company will advance $12,500.00 of Incentive Compensation on a monthly basis, as a draw against annual Incentive Compensation. "Pro Rata Incentive Compensation" shall be paid to Executive for any termination. Pro Rata Incentive Compensation equals the Incentive Compensation for the fiscal year of termination multiplied by a fraction, the numerator of which is the number of days in the current fiscal year through Date of Termination and the denominator is 365. If, for the purpose of calculating Incentive Compensation or Pro Rata Incentive Compensation, the Incentive Compensation cannot be determined by the time required to be paid, Employer shall make a good faith estimate of the pro rata amount based on an amount Executive would have earned had he continued employment for the entire fiscal year. Executive will also participate in such other incentive compensation plans, policies or practices as the Board shall determine. 2 (c) Expenses. Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him (in accordance with the policies and procedures then in effect and established by the Company for its senior executive officers) in performing services hereunder during the Period of Employment, provided that Executive properly accounts therefor in accordance with the Company policy. (d) Other Benefits. During the Period of Employment, Executive shall be entitled to continue to participate in or receive benefits under all of the Company's Employee Benefit Plans in effect on the date hereof, or under plans or arrangements that provide Executive with at least substantially equivalent benefits to those provided under such Employee Benefit Plans. As used herein, "Employee Benefit Plans" include, without limitation, each pension and retirement plan; supplemental pension, retirement and deferred compensation plan; savings and profit-sharing plan; stock ownership plan; stock purchase plan; stock option plan; life insurance plan; medical insurance plan; disability plan; and health and accident plan or arrangement established and maintained by the Company on the date hereof for employees of the same status within the hierarchy of the Company. To the extent that the scope or nature of benefits described in this section are determined under the policies of the Company based in whole or in part on the seniority or tenure of an employee's service, Executive shall be deemed to have a tenure with the Company equal to the actual time of Executive's service with Company. During the Period of Employment, Executive shall be entitled to participate in or receive benefits under any employee benefit plan or arrangement which may, in the future, be made available by the Company to its executive and key management employees, subject to and on a basis consistent with the terms, conditions, and overall administration of such plan or arrangement. Any payments or benefits payable to Executive under a plan or arrangement referred to in this Subparagraph 3(d) in respect of any calendar year during which Executive is employed by the Company for less than the whole of such year shall, unless otherwise provided in the applicable plan or arrangement, be prorated in accordance with the number of days in each calendar year during which he is so employed. Should any such payments or benefits accrue on a fiscal (rather than calendar) year, then the proration in the preceding sentence shall be on the basis of a fiscal year rather than calendar year. (e) Life Insurance. The Company shall pay the premiums on, and maintain in effect throughout the Period of Employment, a life insurance policy on the life of Executive in an amount not less than $2.0 million. Executive shall have the right to designate the beneficiary under such policy. (f) Vacations. Executive shall be entitled to the number of paid vacation days in each calendar year determined by the Company from time to time for executives at the same level as Executive. Executive shall also be entitled to all paid holidays given by the Company to its executives. To the extent that the scope or nature of benefits described in this section are determined under the policies of the Company based in whole or in part on the seniority or tenure of an employee's service, Executive shall be deemed to have a tenure with the Company equal to the actual time of Executive's service with Company. (g) Disability Insurance. The Company shall pay the premiums on, and maintain in effect through the Period of Employment, long-term disability insurance providing for payment 3 of benefits at rates not less than sixty percent (60%) of Executive's current Base Salary or Adjusted Base Salary. 4. Board Service. Executive agrees to serve as a Director of the Company if so elected or appointed. 5. Unauthorized Disclosure. (a) Confidential Information. Executive acknowledges that in the course of his employment with the Company (and, if applicable, its predecessors), he has been allowed to become, and will continue to be allowed to become, acquainted with the Company's business affairs, information, trade secrets, and other matters which are of a proprietary or confidential nature, including but not limited to the Company's and its predecessors' operations, business opportunities, price and cost information, finance, customer information, business plans, various sales techniques, manuals, letters, notebooks, procedures, reports, products, processes, services, and other confidential information and knowledge (collectively the "Confidential Information") concerning the Company's and its predecessors' business. The Company agrees to provide on an ongoing basis such Confidential Information as the Company deems necessary or desirable to aid Executive in the performance of his duties. Executive understands and acknowledges that such Confidential Information is confidential, and he agrees not to disclose such Confidential Information to anyone outside the company except to the extent that (i) Executive deems such disclosure or use reasonably necessary or appropriate in connection with performing his duties on behalf of the Company; (ii) Executive is required by order of a court of competent jurisdiction (by subpoena or similar process) to disclose or discuss any Confidential Information, provided that in such case, Executive shall promptly inform the Company of such event, shall cooperate with the Company in attempting to obtain a protective order or to otherwise restrict such disclosure, and shall only disclose Confidential Information to the minimum extent necessary to comply with any such court order; (iii) such Confidential Information becomes generally known to and available for use by the hotel and hospitality industry (the "Hotel Industry"), other than as a result of any action or inaction by Executive; or (iv) such information has been rightfully received by a member of the Hotel Industry or has been published in a form generally available to the Hotel Industry prior to the date Executive proposes to disclose or use such information. Executive further agrees that he will not during employment and/or at any time thereafter use such Confidential Information in competing, directly or indirectly, with the Company. At such time as Executive shall cease to be employed by the Company, he will immediately turn over to the Company all Confidential Information, including papers, documents, writings, electronically stored information, other property, and all copies of them, provided to or created by him during the course of his employment with the Company. (b) Heirs, successors, and legal representatives. The foregoing provisions of this Paragraph 5 shall be binding upon Executive's heirs, successors, and legal representatives. The provisions of this Paragraph 5 shall survive the termination of this Agreement for any reason. 6. Covenant Not to Compete. In consideration for the Option, Stock Grant, loan evidenced by the Note, the Company's promise to provide Confidential Information as set forth in Paragraph 5 above, and for Executive's employment by the Company under the terms provided 4 in this Agreement and as a means to aid in the performance and enforcement of and preserve the rights of the Company pursuant to the terms of the Unauthorized Disclosure provisions of Paragraph 5, Executive agrees as follows: (a) during the term of Executive's employment with the Company and for a period of twenty-four (24) months thereafter, regardless of the reason for termination of employment, Executive will not, directly or indirectly, as an owner, director, principal, agent, officer, employee, partner, consultant, servant, or otherwise, carry on, operate, manage, control, or become involved in any manner with any business, operation, corporation, partnership, association, agency, or other person or entity which is in the business of owning, operating, managing or granting franchise rights with respect to hotels, motels or other lodging facilities in any location in which the Company, or any subsidiary or affiliate of the Company, operates or has plans or has projected to operate any facility during Executive's term of Employment including any area within a 50 mile radius of such facility (any "Business Area"); provided, however, that the foregoing shall not prohibit Executive from owning up to one percent (1%) of the outstanding stock of a publicly held company engaged in the hospitality business. Notwithstanding the foregoing, after Executive's employment with the Company has terminated, upon receiving written permission by the Board, Executive shall be permitted to engage in such activities with respect to any other hotel, motel or lodging facility that shall be determined in the sole discretion of the Board in good faith to be immaterial to the operations of the Company, or any subsidiary or affiliate of the Company, in the area or territory in question. (b) during the term of Executive's employment with the Company and for a period of twenty-four (24) months thereafter, regardless of the reason for termination of employment, Executive will not, directly or indirectly, either for himself or for any other business, operation, corporation, partnership, association, agency, or other person or entity, call upon, compete for, solicit, divert, or take away, or attempt to divert or take away current or prospective customers (including, without limitation, any hotel owner, lessor or lessee, asset manager, trustee, consumer with whom the Company, or any subsidiary or affiliate of the Company, (i) has an existing agreement or business relationship; (ii) has had an agreement or business relationship within the two- year period preceding the Executive's last day of employment with the Company; or (iii) has included as a prospect in its applicable pipeline) or vendors of the Company, or any subsidiary or affiliate of the Company, in any Business Area. (c) during the term of Executive's employment with the Company and for a period of twenty-four (24) months thereafter, regardless of the reason for termination of employment, Executive will not directly or indirectly solicit or induce any current or prospective employee of the Company, or any subsidiary or affiliate of the Company (including, without limitation, any current or prospective employee of the Company within the six-month period preceding the Executive's last day of employment with the Company or within the 24-month period of this covenant) to accept employment with Executive or with any business, operation, corporation, partnership, association, agency, or other person or entity with which Executive may be associated, and Executive will not employ or cause any business, operation, corporation, partnership, association, agency, or other person or entity with which Executive may be associated to employ any current or prospective employee of the Company, or any subsidiary or 5 affiliate of the Company, without providing the Company with ten (10) days' prior written notice of such proposed employment. (d) Executive agrees and acknowledges that the restrictions contained in this noncompetition covenant are reasonable in scope and duration and are necessary to protect the Company's business interests and Confidential Information after the Effective Date of this Agreement. If any provision of this noncompetition covenant as applied to any party or to any circumstance is adjudged by a court to be invalid or unenforceable, the same will no in way affect any other circumstance or the validity or enforceability of this Agreement. If any such provision, or any part thereof, is held to be unenforceable because of the duration of such provision or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision, and/or to delete specific words or phrases, and in its reduced form, such provision shall then be enforceable and shall be enforced. The parties agree and acknowledge that the breach of this noncompetition covenant will cause irreparable damage to the Company, and upon breach of any provision of this noncompetition covenant, the Company shall be entitled to injunctive relief, specific performance, or other equitable relief; provided, however, that this shall in no way limit any other remedies which the Company may have (including, without limitation, the right to seek monetary damages). (e) Should Executive violate the provisions of this Paragraph, then in addition to all other rights and remedies available to the Company at law or in equity, the duration of this covenant shall automatically be extended for the period of time from which Executive began such violation until he permanently ceases such violation. 7. Termination. Executive's employment hereunder may be terminated without any breach of this Agreement under the following circumstances: (a) Death. Executive's employment hereunder shall terminate upon his death. (b) Disability. If, as a result of Executive's incapacity due to physical or mental illness, Executive shall have been absent from his duties hereunder on a full-time basis for one hundred eighty (180) calendar days in the aggregate in any twelve (12) month period, the Company may terminate Executive's employment hereunder. (c) Termination by Company for Cause. At any time during the Period of Employment, the Company may terminate Executive's employment hereunder for Cause if such termination is approved by not less than a majority of the Board of Directors of the Company at a meeting of such Board of Directors called and held for such purpose. For purposes of this Agreement "Cause" shall mean: (A) conduct by Executive constituting a material act of willful misconduct in connection with the performance of his duties, including, without limitation, misappropriation of funds or property of the Company or any of its affiliates other than the occasional, customary and de minimis use of Company property for personal purposes; (B) criminal or civil conviction of Executive, a plea of nolo contendere by Executive or conduct by Executive that, as determined in the sole discretion of the Board of Directors of the Company, has resulted in, or would result in if he were retained in his position with the Company, material 6 injury to the reputation of the Company, including, without limitation, conviction of a felony involving moral turpitude; (C) continued, willful and deliberate non-performance by Executive of his duties hereunder (other than by reason of Executive's physical or mental illness, incapacity or disability) and such non-performance has continued for more than thirty (30) days following written notice of such non-performance from the Board; (D) a breach by Executive of any of the provisions contained in Paragraphs 5 and 6 of this Agreement; or (E) a violation by the Executive of the Company's employment policies and such violation has continued following written notice of such violation from the Board. (d) Termination Without Cause. At any time during the Period of Employment, the Company may terminate Executive's employment hereunder without Cause if such termination is approved by a majority of the Board at a meeting of the Board called and held for such purpose. Any termination by the Company or Executive's employment under this Agreement which does not constitute a termination for Cause under Subparagraph 7(c) or result from the death or disability of the Executive under Subparagraph 7(a) or (b) shall be deemed a termination without Cause. If the Company provides notice to the Executive under Paragraph 1 that it does not wish to extend the Period of Employment, such action shall be deemed a termination without Cause. (e) Termination by Executive. At any time during the Period of Employment, Executive may terminate his employment hereunder for any reason, including but not limited to Good Reason. If Executive provides notice to the Company under Paragraph 1 that he does not wish to extend the Period of Employment, such action shall be deemed a voluntary termination by Executive and one without Good Reason. For purposes of this Agreement, "Good Reason" shall mean that Executive has complied with the "Good Reason Process" (hereinafter defined) following the occurrence of any of the following events: (A) a substantial diminution or other substantive adverse change, not consented to by Executive, in the nature or scope of Executive's responsibilities, authorities, powers, functions or duties, (B) any removal, during the Period of Employment, from Executive of his titles of President and Chief Operating Officer; (C) an involuntary reduction in Executive's Base Salary, Adjusted Base Salary or Incentive Compensation (but not reduction in Incentive Compensation appropriate for level of performance); (D) a breach by the Company of any of its other material obligations under this Agreement and the failure of Company to cure such breach within thirty (30) days after written notice thereof by Executive; (B) the involuntary relocation of the Company's offices at which Executive is principally employed or the involuntary relocation of the offices of Executive's primary workgroup to a location more than thirty (30) miles from such offices (other than a relocation in either event to Dallas, Texas), or the requirement by the Company for Executive to be based anywhere other than the Company's offices at such location or in Dallas, Texas on an extended basis, except for required travel on obligations; and (F) Executive shall not have been nominated by the Nominating Committee of the Board to fill a seat as a Class A Director when the next such vacancy occurs but in any event prior to the first anniversary of the Effective Date. "Good Reason Process" shall mean that (i) the Executive reasonably determines in good faith that a "Good Reason" event has occurred; (ii) Executive notifies the Company in writing of the occurrence of the Good Reason event; (iii) Executive cooperates in good faith with the Company's efforts, for a period not less than ninety (90) days following such notice, to modify Executive's employment situation in a manner acceptable to Executive and Company; and (iv) notwithstanding such efforts, one or more of the Good Reason events continues to exist and has 7 not been modified in a manner acceptable to Executive. If the Company cures the Good Reason event during the ninety (90) day period, Good Reason shall be deemed not to have occurred. (f) Notice of Term/nation. Except for termination as specified in Subparagraph 7(a), any termination of Executive's employment by the Company or any such termination by Executive shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon. (g) Date of Termination. "Date of Termination" shall mean: (A) if Executive's employment is terminated by his death, the date of his death; (B) if Executive's employment is terminated on account of disability under Subparagraph 7(b) or by the Company for Cause under Subparagraph 7(c), the date on which Notice of Termination is given; (C) if Executive's employment is terminated by the Company under Subparagraph 7(d), sixty (60) days after the date on which a Notice of Termination is given; and (D) if Executive's employment is terminated by Executive under Subparagraph 7(e), thirty (30) days after the date on which a Notice of Termination is given. 8. Compensation Upon Termination or During Disability. (a) If Executive's employment terminates by reason of his death, the Company shall, within ninety (90) days of death, pay in a lump sum amount to such person as Executive shall designate in a notice filed with the Company or, if no such person is designated, to Executive's estate, Executive's accrued and unpaid Base Salary, or, if applicable, his Adjusted Base Salary, to the date of his death, plus his Pro Rata Incentive Compensation, if any, under Subparagraph 3(b). For a period of one (1) year following the Date of Termination, the Company shall pay such health insurance premiums as may be necessary to allow Executive's spouse and dependents to receive health insurance coverage substantially similar to coverage they received prior to the Date of Termination. In addition to the foregoing, any payments to which Executive's spouse, beneficiaries, or estate may be entitled under any employee benefit plan shall also be paid in accordance with the terms of such plan or arrangement. Such payments, in the aggregate, shall fully discharge the Company's obligations hereunder. (b) During any period that Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness, Executive shall continue to receive his accrued arid unpaid Base Salary or, if applicable, his Adjusted Base Salary and accrued and unpaid Incentive Compensation payments, if any, under Subparagraph 3(b), until Executive's employment is terminated due to disability in accordance with Subparagraph 7(b) or until Executive terminates his employment in accordance with Subparagraph 7(e), whichever first occurs. For a period of one (1) year following the Date of Termination, the Company shall pay such health insurance premiums as may be necessary to allow Executive, Executive's spouse and dependents to receive health insurance coverage substantially similar to coverage they received prior to the Date of Termination. Upon termination due to death prior to the termination first to occur as specified in the preceding sentence, Subparagraph 8(a) shall apply. 8 (c) If Executive's employment is terminated by Executive other than for Good Reason as provided in Subparagraph 7(e), then the Company shall, through the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if applicable, his Adjusted Base Salary at the rate in effect at the time Notice of Termination is given. Thereafter, the Company shall have no further obligations to Executive except as otherwise expressly provided under this Agreement, provided any such termination shall not adversely affect or alter Executive's rights under any employee benefit plan of the Company in which Executive, at the Date of Termination, has a vested interest, unless otherwise provided in such employee benefit plan or any agreement or other instrument attendant thereto. (d) If Executive terminates his employment for Good Reason as provided in Subparagraph 7(e) or if Executive's employment is terminated by the Company without Cause as provided in Subparagraph 7(d), then the Company shall, through the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if applicable, his Adjusted Base Salary at the rate in effect at the time Notice of Termination is given and his accrued and unpaid Incentive Compensation, if any, under Subparagraph 3(b). In addition, subject to signing by Executive of a general release of claims in a form and manner satisfactory to the Company, (i) the Company shall continue Executive's compensation at a rate equal to the sum of Executive's Average Base Salary and his Average Incentive Compensation payable for the remaining length of the Period of Employment after the Date of Termination (the "Severance Amount"), but in no event for fewer than twenty-four (24) months. The Severance Amount shall be paid out in substantially equal bi-weekly installments, in arrears; provided, however, that in the event Executive commences any employment with an employer other than the Company during the twelve month period ending on the first anniversary of the Date of termination, the Company shall be entitled to set-off against the remaining Severance Amount fifty percent (50%) of the amount of any cash compensation received by Executive from the new employer during such period, provided further that, in the event Executive commences any employment with, or is employed by, any employer other than the Company during the twelve month period ending on the second anniversary of the Date of Termination, the Company shall be entitled to set-off against the remaining Severance Amount twenty-five percent (25%) of the amount of any cash received by Executive from such employer during such period. From time to time, Executive may be asked to certify to the Company that he has not accepted employment with a new employer (including, without limitation, contract and consulting agreements). For purposes of this Agreement, "Average Base Salary" shall mean the average of the annual Base Salary or, if applicable, Adjusted Base Salary received by Executive for each of the three (3) immediately preceding fiscal years or such fewer number of complete fiscal years as Executive may have been employed by the Company. For purposes of this Agreement, "Average Incentive Compensation" shall mean the average of the annual Incentive Compensation under Subparagraph 3(b) received by Executive for the three (3) immediately preceding fiscal years or such fewer numbers of complete fiscal years as Executive may have been employed by the Company. In no event shall "Average Incentive Compensation" include any sign-on bonus, retention bonus or any other special bonus. Notwithstanding the foregoing, if the Executive breaches any of the provisions contained in Paragraphs 5 and 6 of this 9 Agreement, all payments of the Severance Amount shall immediately cease. Notwithstanding the foregoing, in the event Executive terminates his employment for Good Reason as provided in Subparagraph 7(e), he shall be entitled to the Severance Amount only if he provides the Notice of Termination provided for in Subparagraph 7(f) within thirty (30) days after the occurrence of the event or events which constitute such Good Reason as specified in clauses (A), (B), (C), (D), (E) and (F) of Subparagraph 7(e). (ii) in addition to any other benefits to which Executive may be entitled in accordance with the Company's then existing severance policies, the Company shall, for a period of one (1) year commencing on the Date of Termination, pay such health insurance premiums as may be necessary to allow Executive, Executive's spouse and dependents to continue to receive health insurance coverage substantially similar to the coverage they received prior to his termination of employment. (e) If Executive's employment is terminated by the Company for Cause as provided in Subparagraph 7(c), then the Company shall, through the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if applicable, his Adjusted Base Salary at the rate in effect at the time Notice of Termination is given. Thereafter, the Company shall have no further obligations to Executive except as otherwise expressly provided under this Agreement, provided any such termination shall not adversely affect or alter Executive's rights under any employee benefit plan of the Company in which Executive, at the Date of Termination, has a vested interest, unless, otherwise provided in such employee benefit plan or any agreement or other instrument attendant thereto. (f) Regardless of the reason for termination, for a period of five (5) years beginning on the Date of Termination, the Company will provide such reasonable assistance and support to Executive as he shall reasonably require in connection with the preparation and filing of tax returns, statements and forms insofar as such returns, statements or forms relate to Executive's association with the Company or any of its predecessors or affiliates. At the Company's election, such assistance and support shall be provided by either tax personnel from the Company or certified public accountants selected and compensated by the Company. (g) Nothing contained in the foregoing Subparagraphs 8(a) through 8(f) shall be construed so as to effect Executive's rights or the Company's obligations relating to agreements or benefits which are unrelated to termination of employment. 9. Change in Control Payment. The provisions of this Paragraph 9 set forth certain terms of an agreement reached between Executive and the Company regarding Executive's rights and obligations upon the occurrence of a Change in Control of the Company. These provisions are intended to assure and encourage in advance Executive's continued attention and dedication to his assigned duties and his objectivity during the pendency and after the occurrence of any such event. These provisions shall apply in lieu of, and expressly supersede, the provisions of Subparagraph 8(d)(i) regarding severance pay upon a termination of employment, if such termination of employment occurs within eighteen (18) months after the occurrence of the first event constituting a Change in Control; provided that such first event occurs during the Period of 10 Employment. These provisions shall terminate and be of no further force or effect beginning eighteen (18) months after the occurrence of a Change in Control. (a) Change in Control (i) If within eighteen (18) months after the occurrence of the first event constituting a Change in Control, Executive's employment is terminated by the Company without Cause as provided in Subparagraph 7(d) or Executive terminates his employment for Good Reason as provided in Subparagraph 7(e), then the Company shall pay Executive the Severance Amount as provided in Subparagraph 8(d)(i) in substantially biweekly installments, in arrears, over twenty-four (24) months. Notwithstanding the foregoing, if the Executive breaches any of the provisions contained in Paragraphs 5 and 6 of this Agreement, all payments of the Severance Amount shall immediately cease; (ii) Within fifteen (15) days after Executive becomes entitled to receive the Severance Amount under (i) above, the Company shall place funds in an amount equal to the estimated Severance Agreement in escrow, pursuant to arrangements that are mutually acceptable to the Company and Executive (the "Escrow Arrangement"). The Escrow Arrangement shall be maintained until the final installment payment of the Severance Amount has been made; (iii) Notwithstanding anything to the contrary in any applicable option agreement or stock-based award agreement, if Executive terminates his employment for Good Reason as provided in Subparagraph 7(e) or if Executive's employment is terminated by the Company without Cause as provided in Subparagraph 7(d) within eighteen (18) months of a Change in Control, all stock options and other stock-based awards granted to Executive by the Company shall immediately accelerate and become exercisable or non-forfeitable as of the Date of Termination, and Executive shall have 360 days to exercise his stock options. Executive shall also be entitled to any other rights and benefits with respect to stock-related awards, to the extent and upon the terms provided in the employee stock option or incentive plan or any agreement or other instrument attendant thereto pursuant to which such options or awards were granted; and (iv) The Company shall, for a period of one (1) year commencing on the Date of Termination, pay such health insurance premiums as may be necessary to allow Executive, Executive's spouse and dependent to continue to receive health insurance coverage substantially similar to the coverage they received prior to his termination employment. (b) Gross Up Payment. (i) Excess Parachute Payment. If Executive incurs the tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986 (the "Code") on "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code, the Company will pay to Executive an amount (the "Gross Up Payment") such that the net amount retained by Executive, after deduction of any Excise Tax on the excess parachute 11 payment and any federal, state and local income taxes and employment taxes (together with penalties and interest) and Excise Tax upon the payment provided for by this Subparagraph 8(c)(i), will be equal to the Severance Amount. (ii) Applicable Rates. For purposes of determining the amount of the Gross Up Payment, Executive will be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross Up Payment is to be made and state and local income taxes at the highest marginal rates of taxation in the state and locality of Executive's residence on the date of Executive's Termination, net of the maximum reduction in federal income taxes that could be obtained from deduction of such state and local taxes. (iii) Determination of Gross Up Payment Amount. The determination of whether the Excise Tax is payable and the amount thereof will be based upon the opinion of tax counsel selected by Executive and approved by the Company, which approval will not be unreasonably withheld. If such opinion is not finally accepted by the Internal Revenue Service (or state and local taxing authorities), then appropriate adjustments to the Excise Tax will be computed and additional Gross Up Payments will be made in the manner provided by this Subparagraph (c). (iv) Time For Payment. The Company will pay the estimated amount of the Gross Up Payment in cash to Executive at such time of times when the Excise Tax is due. Executive and the Company agree to reasonably cooperate in the determination of the actual amount of the Gross Up Payment. Further, Executive and the Company agree to make such adjustments to the estimated amount of the Gross Up Payment, which in the case of Executive will refer to refunds of prior overpayments and in the case of the Company will refer to makeup of prior underpayments. (c) Definitions. For purpose of this Paragraph 9, the following terms shall have the following meanings: "Change in Control" shall mean any of the following: (a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (the "Acquiring Person"), other than the Company, or any of its Subsidiaries or any Investor or Excluded Group, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the combined voting power or economic interests of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, that any transfer from any Investor or Excluded Group will not result in a Change in Control if such transfer was part of a series of related transactions the effect of which, absent the transfer to such Acquiring Person by the Investor or Excluded Group, would not have resulted in the acquisition by such Acquiring Person of 35% or more of the combined voting power or economic interests of the then outstanding voting securities; or 12 (b) during any period of 12 consecutive months after the Issuance Date, the individuals who are the beginning of any such 12-month period constituted a majority of the Class A Directors and Class C Directors (the "Incumbent Non-Investor Majority") cease for any reason to constitute at least a majority of such Class A Directors and Class C Directors; provided that (i) any individual becoming a director whose election, or nomination for election by the Company's stockholders, was approved by a vote of the stockholders having the right to designate such director and (ii) any director whose election to the Board or whose nomination for election by the stockholders of the Company was approved by the requisite vote of directors entitled to vote on such election or nomination in accordance with the Restated Certificate of Incorporation of the Company, shall, in each such case, be considered as though such individual were a member of the Incumbent Non-Investor Majority, but excluding, as a member of the Incumbent Non-Investor Majority, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) and further excluding any person who is an affiliate or associate of an Acquiring Person having or proposing to acquire beneficial ownership of 25% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; or (c) the approval by the stockholders of the Company of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the voting securities of the Company immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 57.5% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of director of the Company resulting from such reorganization, merger or consolidation; or (d) the sale or other disposition of assets representing 50% or more of the assets of the Company in one transaction or series of related transactions. All defined terms used in the definition of "Change in Control" shall have the same meaning as set forth in the Form of Certificate of Designation of Series B Convertible Preferred Stock of Wyndham International, Inc. "Company" shall mean not only Wyndham International, Inc., but also its successors by merger or otherwise. 10. Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed as follows: if to the Executive: 13 At his home address as shown in the Company's personnel records; if to the Company: Wyndham International, Inc. 1950 Stemmons Freeway Suite 6001 Dallas, TX 75207 Attention: Senior Vice President of Human Resources and General Counsel or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 11. Miscellaneous. No provisions of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by Executive and such officer of the Company as may be specifically designated by the Board. No waiver by either party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, unless specifically referred to herein, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of Texas (without regard to principles of conflicts of laws.) 12. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. The invalid portion of this Agreement, if any, shall be modified by any court having jurisdiction to the extent necessary to render such portion enforceable. 13. Counterparts. This agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 14. Arbitration; Other Disputes. In the event of any dispute or controversy arising under or in connection with this Agreement, the parties shall first promptly try in good faith to settle such dispute or controversy by mediation under the applicable rules of the American Arbitration Association before resorting to arbitration. In the event such dispute or controversy remains unresolved in whole or in part for a period of thirty (30) days after it arises, the parties will settle any remaining dispute or controversy exclusively by arbitration in Dallas, Texas in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. Notwithstanding the above, the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of Paragraph 5 or 6 hereof. Furthermore, should a dispute occur concerning Executive's mental or physical capacity as 14 described in Subparagraph 7(b), 7(c) or 8(b), a doctor selected by Executive and a doctor selected by the Company shall be entitled to examine Executive. If the opinion of the Company's doctor and Executive's doctor conflict, the Company's doctor and Executive's doctor shall together agree upon a third doctor, whose opinion shall be binding. Any amount to which Executive is entitled under this Agreement (including any disputed amount), which is not paid when due, shall bear interest at a rate equal to the lesser of eighteen percent (18%) per annum or the maximum lawful rate. 15. Third-Party Agreements and Rights. Executive represents to the Company that Executive's execution of this Agreement, Executive's employment with the Company and the performance of Executive's proposed duties for the Company will not violate any obligations Executive may have to any employer or other party, and Executive will not bring to the premises of the Company any copies or other tangible embodiments of non-public information belonging to or obtained from any such previous employment or other party. 16. Litigation and Regulatory Cooperation. During and after Executive's employment, Executive shall reasonably cooperate with the Company in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while Executive was employed by the Company; provided, however, that such cooperation shall not materially and adversely affect Executive or expose Executive to an increased probability of civil or criminal litigation. Executive's cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times. During and after Executive's employment, Executive also shall cooperate fully with the Company in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while Executive was employed by the Company. The Company shall also provide Executive with compensation on an hourly basis (to be derived from the sum of his Base Compensation or, if applicable, Adjusted Base Salary and Average Incentive Compensation) for requested litigation and regulatory cooperation that occurs after his termination of employment, and reimburse Executive for all costs and expenses incurred in connection with his performance under this Paragraph 14, including, but not limited to, reasonable attorneys' fees and costs. 17. Gender Neutral. Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise. 18. Governing Law and Consent. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Texas without giving effect to any choice of law or conflict provisions or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas, and Executive hereby expressly consents to the personal jurisdiction of the state and federal courts located in Dallas County, Texas for any lawsuit filed by the Company to seek a restraining order or injunction to prevent any continuation of any violation of Paragraph 5 or 6 of this Agreement. 19. Effective Date. This Agreement is effective ____________________, 1999. 15 IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written. WYNDHAM INTERNATIONAL, INC. By: /s/ JAMES D. CARREKAR ------------------------------------- Its: Chairman and Chief Executive Officer /s/ FRED J. KLEISNER ---------------------------------------- Fred J. Kleisner 16 EX-10.3 4 EMPLOYMENT AGREEMENT WITH JAMES CARREKAR EXHIBIT 10.3 EXECUTIVE EMPLOYMENT AGREEMENT This EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made as of the 18th day of August, 1999, between Wyndham International, Inc., a Delaware corporation ("Employer"), and James D. Carreker ("Executive"), but it shall become effective only on the date set forth in paragraph 25 below (the "Effective Date"). WHEREAS, Executive has previously had a valued association with Patriot American Hospitality, Inc., a Virginia corporation ("Previous Employer") and a predecessor of Previous Employer, Wyndham Hotel Corporation, a Delaware corporation ("WHC"); WHEREAS, Executive has previously entered into an Executive Employment Agreement with Previous Employer, which has been subsequently assumed and honored by Employer (the "Prior Agreement"); WHEREAS, Executive currently serves as CEO of Employer. WHEREAS, Employer, acting by and through the Board of Directors of Employer (the "Board"), now desires to terminate the Prior Agreement and supercede the Prior Agreement with this Agreement to better ensure the future of Employer by establishing a continuing relationship with Executive; WHEREAS, Executive, seeking to serve the best interests of Employer, is agreeable to terminating the Prior Agreement and superceding the Prior Agreement with this Agreement on the terms herein provided; WHEREAS, as an additional inducement to Executive to enter into this Agreement, Employer shall, on the Effective Date enter into a separate "indemnification agreement" with Executive in the form attached hereto as Exhibit A (the "Indemnification Agreement"); WHEREAS, as an additional inducement to Executive to enter into this Agreement, Employer shall, as of the Effective Date grant Executive an option (such option being herein referred to as the "Stock Options") to purchase a certain number of "Shares" (herein so called) of common stock of Employer at a floor price of $5.00 per each of the Shares and as otherwise set forth in the Agreement attached hereto as Exhibit B (the "Option Agreement"); and WHEREAS, Executive is desirous of committing himself to serve Employer on the terms herein provided, NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration,, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Employment. The initial term of this Agreement shall extend from the Effective Date until the fifth anniversary of the Effective Date. On the third anniversary of the Effective Date and every even-numbered calendar year anniversary date thereafter (e.g., 2004, 2006. . .), the term of this Agreement shall be automatically extended for an additional two (2) years unless either party otherwise elects by notice in writing delivered to the other at least ninety (90) days prior to the third anniversary or ninety (90) days prior to the concerned even-numbered calendar year anniversary date thereafter; provided, however that this sentence shall not be deemed to reduce the five (5) year initial term of this Agreement; provided, further, that if a Change in Control (as hereinafter defined) occurs during the initial or extended term of this Agreement, the term of this Agreement shall continue in effect for a period of not less than eighteen (18) months - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 2 beyond that month in which that Change in Control occurred. The term of the Agreement shall be subject to termination only as provided in paragraph 7. The term of this Agreement may be referred to herein as the "Period of Employment." 2. Position and Duties. During the Period of Employment, Executive shall serve as Chairman and Chief Executive Officer of Employer, reporting to the Board; shall have supervision and control over and responsibility for the day-to-day business and affairs of Employer; and shall have such other powers and duties as may from time to time be prescribed by the Board, provided that such duties are consistent with the normal and customary responsibilities of a Chairman and Chief Executive Officer. Should, during the Period of Employment, Executive not be nominated to serve (or, if nominated, not be elected to serve) as a director or member of the Board, then Executive may, as provided in subparagraph 7(e), terminate his employment hereunder, which termination shall be deemed to be for Good Reason, as defined in subparagraph 7(e). Except as provided otherwise herein, Executive shall devote his full working time and working efforts to the business and affairs of Employer and Previous Employer. Notwithstanding the foregoing, Executive may serve on other boards of directors or engage in religious, charitable, or other community activities as long as such services and activities are disclosed to the Board and do not materially interfere with Executive's performance of his duties as provided in this Agreement. 3. Compensation and Related Matters (a) Base Salary. Initially, Executive shall receive an annual minimum base salary ("Base Salary") equal to Six Hundred Thousand Dollars and No/100 Cents ($600,000.00). Thereafter, Executive's Base Salary shall be redetermined at least thirty (30) days before each - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 3 annual compensation determination date established by Employer during the Period of Employment but in any event no later than the first quarter of the applicable fiscal year (the "Annual Compensation Determination Date") in an amount to be fixed by the Board, but in no event shall such re-determined Base Salary be less than $600,000.00. The Base Salary, as redetermined, is referred to herein as the "Adjusted Base Salary." The Base Salary or, if applicable, the Adjusted Base Salary, shall be payable in substantially equal bi-weekly installments. (b) Incentive Compensation. In addition to Base Salary or, if applicable, Adjusted Base Salary, Executive shall be eligible to receive in each fiscal year during the Period of Employment, on or about the Annual Compensation Determination Date (or earlier as provided in Paragraph 8 and 9 of this Agreement), cash incentive compensation (the "Incentive Compensation") in an amount determined annually by the Compensation Committee of the Board based on individual performance, "Employer EBITDA Achievement" (as hereinafter defined), and total return to shareholders. Incentive Compensation shall equal from zero to three times the then current Base Salary or, if applicable, Adjusted Base Salary. "Employer EBITDA Achievement" is the degree to which the annual budget established by Employer for earnings before interest, taxes, depreciation, and amortization is achieved. Notwithstanding the foregoing, the Incentive Compensation shall equal at least one hundred fifty percent (150%) of the Base Salary or, if applicable, Adjusted Base Salary for any year in which Employer EBITDA Achievement is one hundred percent (100%) or more ("Target Incentive Compensation"). "Pro Rata Incentive Compensation" shall be paid to Executive for any termination. Pro Rata Incentive Compensation equals the Incentive Compensation for the fiscal year of termination multiplied by a fraction, the numerator of which is the number of days in the current - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 4 fiscal year through Date of Termination and the denominator is 365. If, for the purpose of calculating Incentive Compensation or Pro Rata Incentive Compensation, the Incentive Compensation cannot be determined by the time required to be paid, Employer shall make a good faith estimate of this amount, resolving all doubts in favor of Executive and, in calculating the Pro Rata Incentive Compensation, such good faith estimate shall be based on an amount Executive would have earned had he continued employment for the entire fiscal year. Executive will also participate in such other incentive compensation plans, policies or practices as the Board shall determine. (c) Expenses. Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him (in accordance with the policies and procedures then in effect and established by Employer for its senior executive officers) in performing services hereunder during the Period of Employment, provided that Executive properly accounts therefor in accordance with Employer policy. (d) Country Club Entertainment Benefit. Employer shall, if Executive so requests, provide Executive with a country club membership at Preston Trails Golf Club (or an equivalent club selected by Executive) and pay or reimburse Executive for all charges for goods and services incurred relating to Employer's business and for all membership costs and dues incurred with regard thereto by or on behalf of Executive. (e) Automobile Allowance. Employer shall provide Executive with a company car or allowance therefor, which car or allowance shall be for, or sufficient for, a BMW 750i or - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 5 equivalent selected by Executive. (f) Air Travel Allowance. Executive, and, when requested by Executive, his spouse, shall be provided with or reimbursed for the cost of first-class or private aircraft travel when Executive is traveling on Employer's business, as and when Executive deems such travel to be required or convenient. (g) Other Benefits. During the Period of Employment, Executive shall be entitled to continue to participate in or receive benefits under all of Employer's Employee Benefit Plans in effect on the date hereof, or under plans or arrangements that provide Executive with at least substantially equivalent benefits to those provided under such Employee Benefit Plans. As used herein, "Employee Benefit Plans" include, without. limitation, each pension and retirement plan, supplemental pension, retirement and deferred compensation plan, savings and profit-sharing plan, stock ownership plan, stock purchase plan, stock option plan, life insurance plan, medical insurance plan, disability plan, and health and accident plan, or arrangement established and maintained by Employer on the date hereof and enhancements thereof hereafter made. To the extent that the scope or nature of benefits described in this section are determined based in whole or in part on the seniority or tenure of an employee's service, Executive shall be deemed to have a tenure with Employer equal to the actual time of Executive's service with Employer plus the actual service by Executive to the Previous Employer and to WHC. During the Period of Employment, Executive shall be entitled to participate in or receive benefits under any of the Employee Benefit Plans or arrangements that may, in the future, be made available by Employer to its executives and key management employees, subject to and on a basis consistent with the terms, conditions, and overall administration of such plans or arrangements. Nothing paid to Executive under the Employee Benefit Plans presently in effect or any employee benefit plan or - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 6 arrangement that may be made available in the future shall be deemed to be in lieu of compensation otherwise payable to Executive under subparagraphs 3(a) and 3(b) and elsewhere in this Agreement. Any payments or benefits payable to Executive under a plan or arrangement referred to in this subparagraph 3(g) in respect of any calendar year during which Executive is employed by Employer for less than the whole of such year shall, unless otherwise provided in such plan or arrangement, be prorated in accordance with the number of days in such calendar year during which he is so employed. Should any such payments or benefits accrue on a fiscal (rather than calendar) year, then the proration in the preceding sentence shall be on the basis of a fiscal year rather than calendar year. (h) Life Insurance. Employer shall pay the premiums on, and maintain in effect throughout the Period of Employment, a life insurance policy on the life of Executive in an amount of not less than $2,000,000.00. Executive shall have the right to designate the beneficiary under such policy. (i) Vacations. Executive shall be entitled to a minimum of twenty (20) days of paid vacation in each calendar year or such greater number of days as is determined by Employer from time to time for its senior executive officers. Executive shall also be entitled to all paid holidays given by Employer to its senior executive officers. To the extent that the scope or nature of benefits described in this section are determined under the policies of Employer, based in whole or in part on the seniority or tenure of an employee's service, Executive shall be deemed to have a tenure with Employer equal to the actual time of Executive's service with Employer plus the actual service by Executive to the Previous Employer and WHC. (j) Disability Insurance. Employer shall pay the premiums on, and maintain in - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 7 effect throughout the Period of Employment, long-term disability insurance providing for payment of benefits at rates not less than 60% of Executive's Base Salary or, if applicable, his Adjusted Base Salary. (k) Employer Property Usage Policy. During the Period of Employment and thereafter, unless Executive's employment by Employer terminates "For Cause" as that term is defined in subparagraph 7(c), Executive shall be provided with rights and benefits comparable to the standard rights and benefits provided to the Directors who are currently serving on the Board. (l) Comparability. Notwithstanding anything to the contrary in the foregoing provisions of this paragraph 3, so long as Executive serves as the CEO of Employer, the sum of Executive's Base Salary or, if applicable, Adjusted Base Salary, and Target Incentive Compensation shall in no event be less than one hundred fifty percent (15 0%) of the sum of the Salary and Target Incentive Compensation paid to the next highest paid employee of the Employer and one hundred percent (100%) of each and all benefits under Employee Benefit Plans or otherwise awarded to any other employee of Employer. All other terms and provisions of this Agreement shall at all times be deemed amended to the end that such terms and provisions are at all times, and from time to time, at least as favorable to Executive as such terms and provisions would be under any other employment agreement to which Employer is a party. 4. Board Service. Executive agrees to serve as a director of Employer and Previous Employer, if elected or appointed, provided he is forever indemnified for serving in such capacities as set forth in the Indemnification Agreement, which indemnity shall survive the termination of the Indemnification Agreement and the termination of this Agreement. Employer will provide appropriate Directors' and Officers' Insurance naming Executive as a named - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 8 insured with limits of no less than provided to other officers and directors. 5. Unauthorized Disclosure. (a) Confidential Information. Executive acknowledges that in the course of his employment with Employer (and, if applicable, the predecessors of Employer or Previous Employer or WHC), he has been allowed to become, and will continue to be allowed to become, acquainted with Employer's business affairs, information, trade secrets, and other matters that are of a proprietary or confidential nature, such as business opportunities, price and cost information, finance, customer information, business plans, various sales techniques, manuals, letters, notebooks, procedures, reports, products, processes, services, and other confidential information and knowledge (collectively, the "Confidential Information") concerning Employer's, Previous Employer's, and their respective predecessors' business. Employer agrees to provide, on an ongoing basis, such Confidential Information as Employer deems necessary or desirable to aid Executive in the performance of his duties. Executive understands and acknowledges that such Confidential Information is confidential, and he agrees not to disclose such Confidential Information to anyone outside Employer, except as he deems reasonably necessary or appropriate in connection with performing his duties on behalf of Employer. Executive further agrees that he will not during employment and/or at any time thereafter use such Confidential Information in competing, directly or indirectly, with Employer or Previous Employer. At such time as Executive shall cease to be employed by Employer, he will immediately turn over to Employer all Confidential Information, including papers, documents, writings, electronically stored information, other property, and all copies of them provided to or created by him during the course of his employment with Employer (or, if applicable, Previous Employer). - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 9 (b) Heirs, successors, and legal representatives. The foregoing provisions of this paragraph 5 shall be binding upon Executive's heirs, successors, and legal representatives. The provisions of this paragraph 5 shall survive the termination of this Agreement for any reason. 6. Covenant Not to Compete. In consideration for the Option Agreement, the Employer's promise to provide Confidential Information as set forth in Paragraph 5 above, and for Executive's employment by the Employer under the terms provided in this Agreement, and as a means to aid in the performance and enforcement of and preserve the rights of the Employer pursuant to the terms of the Unauthorized Disclosure provisions of Paragraph 5, Executive agrees as follows: (a) during the term of Executive's employment with the Employer and for a period of twenty-four (24) months thereafter, regardless of the reason for termination of employment, Executive will not, directly or indirectly, as an owner, director, principal, agent, officer, employee, partner, consultant, servant, or otherwise, carry on, operate, manage, control, or become involved in any manner with any business, operation, corporation, partnership, association, agency, or other person or entity which is in the business of owning, operating, managing or granting franchise rights with respect to the top ten branded hotel companies, as defined by accepted industry consultants, such as Price Waterhouse Coopers, in any city in which the Employer, or any subsidiary or affiliate of the Employer, operates any facility during Executive's term of Employment; provided, however, that the foregoing shall not prohibit Executive from owning up to one percent (1%) of the outstanding stock of a publicly held company engaged in the hospitality business or holding as a purely passive investor of less than a controlling interest in any other entity. Notwithstanding the foregoing, after Executive's employment with the Employer has terminated, upon receiving written permission by the Board, - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 10 Executive shall be permitted to engage in such activities with respect to any other hotel, motel or lodging facility that shall be determined in the sole discretion of the Board in good faith to be immaterial to the operations of the Employer, or any subsidiary or affiliate of the Employer, in the area or territory in question. (b) during the term of Executive's employment with the Employer and for a period of twenty-four (24) months thereafter, regardless of the reason for termination of employment, Executive will not, directly or indirectly, either for himself or for any other business, operation, corporation, partnership, association, agency, or other person or entity, call upon, compete for, solicit, divert, or take away, or attempt to divert or take away current or prospective customers (including, without limitation, any hotel owner, lessor or lessee, asset manager, trustee, consumer with whom the Employer, or any subsidiary or affiliate of the Employer, (i) has an existing agreement or business relationship; (ii) has had an agreement or business relationship within the two- year period preceding the Executive's last day of employment with the Employer; or (iii) has included as a prospect in its applicable pipeline) or any subsidiary or affiliate of the Employer. (c) during the term of Executive's employment with the Employer and for a period of twenty-four (24) months thereafter, regardless of the reason for termination of employment, Executive will not directly or indirectly solicit or induce any current or prospective employee of the Employer, or any subsidiary or affiliate of the Employer (including, without limitation, any current or prospective employee of the Employer within the six-month period preceding the Executive's last day of employment with the Employer or within the 24-month period of this covenant) to accept employment with Executive or with any business, operation, corporation, partnership, association, agency, or other person or entity with which Executive may be associated, and Executive will not employ or cause any business, operation, corporation, - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 11 partnership, association, agency, or other person or entity with which Executive may be associated to employ any current or prospective employee of the Employer, or any subsidiary or affiliate of the Employer, without providing the Employer with ten (10) days' prior written notice of such proposed employment. (d) Executive agrees and acknowledges that the restrictions contained in this noncompetition covenant are reasonable in scope and duration and are necessary to protect the Employer's business interests and Confidential Information after the Effective Date of this Agreement. If any provision of this noncompetition covenant as applied to any party or to any circumstance is adjudged by a court to be invalid or unenforceable, the same will no in way affect any other circumstance or the validity or enforceability of this Agreement. If any such provision, or any part thereof, is held to be unenforceable because of the duration of such provision or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision, and/or to delete specific words or phrases, and in its reduced form, such provision shall then be enforceable and shall be enforced. The parties agree and acknowledge that the breach of this noncompetition covenant will cause irreparable damage to the Employer, and upon breach of any provision of this noncompetition covenant, the Employer shall be entitled to injunctive relief, specific performance, or other equitable relief provided, however, that this shall in no way limit any other remedies which the Employer may have (including, without limitation, the right to seek monetary damages). (e) Should Executive violate the provisions of this Paragraph, then in addition to all other rights and remedies available to the Employer at law or in equity, the duration of this covenant shall automatically be extended for the period of time from which Executive began - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 12 such violation until he permanently ceases such violation. (f) Should, however, Employer fail to timely pay any sums or otherwise fail to timely provide any benefit due and owing to Executive, his family, or his estate within ten (10) days after Executive or a representative or his family or estate notifies Employer in writing of a failure to timely pay any such sums or timely provide any such benefits, the provisions of this paragraph 6 shall no longer be binding and shall have no force or effect, unless and until Executive is, after a full and final hearing, found to be in material breach of this Agreement in an arbitrator's award made by an arbitrator appointed under paragraph 18 of this Agreement. 7. Termination. Executive's employment hereunder may be terminated without any breach of this Agreement under the following circumstances: (a) Death. Executive's employment hereunder shall terminate upon his death. (b) Disability. Employer shall be entitled to terminate the Executive's employment because of the Executive's Disability during the Period of Employment. "Disability" means that as a result of Executive's incapacity due to physical or mental illness Executive shall have been absent from his duties hereunder or a full-time basis for one hundred eighty (180) calendar days in the aggregate in any twelve (12) month period (such period to not include, however, any time that Executive is on leave of absence as authorized by this Agreement or Employer's leave policies). A termination of the Executive's employment by Employer for Disability, shall after the 180 calendar day period described above in this subparagraph (7(b), be communicated to the Executive by written notice, and shall be effective on the 60th day after receipt of such notice by the Executive (the "Disability Effective Date"), unless the Executive returns to full-time performance of the Executive's duties before the Disability Effective Date. - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 13 (c) Termination by Employer For Cause. At any time during the Period of Employment, Employer may terminate Executive's employment hereunder for Cause if such termination is approved by not less than a majority of the entire membership of the Board at a meeting of the Board called and held for such purpose. For purposes of this Agreement "Cause" shall mean: (i) the willful and continued failure of the Executive substantially to perform the Executive's duties under this Agreement (other than as a result of physical or mental illness or injury), after the Board delivers to the Executive a written demand for substantial performance and such nonperformance has continued for more than 60 days following written notice of nonperformance from the Board that specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties (provided, however, that Executive shall not be deemed to be in nonperformance if within such 60-day time period following receipt by Executive of such notice he has taken steps reasonably calculated to resolve such nonperformance); (ii) illegal conduct or gross misconduct by the Executive, that has resulted in material injury to the reputation of Employer; or (iii) a material breach by Executive of the covenants contained in paragraph 5 of this Agreement. (d) Termination Without Cause. At any time during the Period of Employment, Employer may terminate Executive's employment hereunder without (i.e., not for) Cause if such termination is approved by not less than a majority of the entire membership of the Board at a meeting of the Board called and held for such purpose. Further, any termination by Employer of Executive's employment that is not otherwise governed by this paragraph 7 shall also be deemed a termination without, or not for, Cause. (e) Termination by Executive. At any time during the Period of Employment, Executive may terminate his employment hereunder for any reason, including but not limited to - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 14 "Good Reason" (as hereinafter defined). For purposes of this Agreement, "Good Reason" shall mean that Executive has complied with the "Good Reason Process" (as hereinafter defined) following the occurrence of any of the following events (referred to individually as a "Good Reason Event" and collectively as "Good Reason Events"): (A) any substantial adverse change, not consented to by Executive in a writing signed by him, in the nature or scope of Executive's responsibilities, authorities, powers, functions, or duties exercised by Executive immediately prior to the Effective Date, except as provided in paragraph 11; (B) any removal, during the Period of Employment, of Executive from, or any failure by management to nominate, or, if nominated, any failure by the stockholders to re-elect Executive to, any of the positions indicated in paragraph 2; (C) an involuntary reduction in Executive's Base Salary or Adjusted Base Salary or Target Incentive Compensation; (D) a breach by Employer of any of its other material obligations under this Agreement and the failure of Employer to cure such breach within thirty (30) days after written notice thereof by Executive; (B) the relocation of Employer's primary offices at which Executive is principally employed to a location more than thirty (30) miles from Executive's current offices, or the requirement by Employer for Executive to be based anywhere other than Employer's primary offices at such current location [or more than 30 miles therefrom] on an extended basis, except for required travel on Employer's business to an extent substantially consistent with Executive's current business travel obligations; or (F) Employer gives notice of non-extension of the Period of Employment under paragraph 1 of this Agreement. "Good Reason Process" shall mean that (i) the Executive reasonably determines in good faith that a Good Reason Event has occurred; (ii) Executive notifies Employer in writing of the occurrence of the Good Reason Event; (iii) Executive cooperates in good faith with Employer's efforts, for a period not more than thirty (30) days following such notice, to modified Executive's employment - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 15 situation in a manner acceptable to Executive and Employer; and (iv) notwithstanding such efforts, one or more of the Good Reason Events continues to exist for a period of more than thirty (30) days following such notice and has not been modified in a manner acceptable to Executive. (f) Notice of Termination. Except for termination as specified in subparagraph 7(a), any termination of Executive's employment by Employer or any such termination by Executive shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that shall indicate the specific provision in this Agreement relied upon. (g) Date of Termination. "Date of Termination" shall mean: (A) if Executive's employment is terminated by his death, the date of his death; (B) if Executive's employment is terminated on account of Disability under subparagraph 7(b) on the Disability Effective Date unless Executive returns to full-time performance of Executive's duties before the Disability Effective Date; (C) if Executive's employment is terminated by Employer under subparagraphs 7(c) or (d) thirty (30) days after the date on which a Notice of Termination is given; and (D) if Executive's employment is terminated by Executive under subparagraph 7(e), thirty (30) days after the date on which a Notice of Termination is given. 8. Compensation Upon Termination or During Disability (a) Death. If Executive's employment terminates by reason of his death, Employer shall, within thirty (30) days of death, pay in a lump sum amount to such person as his estate shall designate in a notice filed with Employer or, if no such person is designated, to Executive's estate, (i) Executive's accrued and unpaid Base Salary or, if applicable, his Adjusted Base - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 16 Salary, through the date of his deaths and (ii) any accrued and any unpaid Incentive Compensation and Pro Rata Incentive Compensation. Upon such death, all unvested stock options and stock-based grants shall immediately vest in Executive's estate or other legal representatives and become exercisable, and Executive's estate or other legal representatives shall have one (1) year from the Date of Termination, or remaining option term, if later, to exercise the stock options. For a period of five (5) years following the Date of Termination, Employer shall pay such health insurance premiums as may be necessary to allow Executive's spouse and other dependents to receive health insurance coverage substantially similar to the coverage they received prior to the Date of Termination. (b) Disability. During any period that Executive is unable to perform his duties hereunder as a result of incapacity due to physical or mental illness or injury, Executive shall continue to receive his accrued and unpaid Base Salary or, if applicable, his Adjusted Base Salary, and accrued and unpaid Incentive Compensation payments under subparagraph 3(b), until and unless Executive's employment is terminated due to Disability in accordance with subparagraph 7(b) or until Executive terminates his employment in accordance with subparagraph 7(e), whichever first occurs. In the event of termination due to Disability Employer shall, within thirty (30) days of the Disability Effective Date, pay in a lump sum amount to Executive (i) his accrued and unpaid Base Salary or, if applicable, his Adjusted Base Salary through the Date of Termination, plus (ii) any accrued and unpaid Incentive Compensation and Pro Rata Incentive Compensation. Upon the Disability Effective Date, all unvested stock options and stock-based grants shall immediately vest and become exercisable and Executive shall have one (1) year from the Date of Termination, or the remaining option term, if later, to exercise the stock options. For a period of two (2) years following the Date of - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 17 Termination, Employer shall pay such health insurance premiums as may be necessary to allow Executive and Executive's spouse and other dependents, to receive health insurance coverage substantially similar to the coverage they received prior to the Date of Termination. Upon termination due to death prior to the Disability Effective Date, subparagraph 8(a) shall apply. (c) By Executive Not for Good Reason. If Executive's employment is terminated by Executive other than for Good Reason as provided in subparagraph 7(e), then Employer shall, through the Date of Termination, pay Executive (i) his accrued and unpaid Base Salary or, if applicable, his Adjusted Base Salary at the rate in effect on the date Notice of Termination is given, and (ii) any accrued, earned, and unpaid Incentive Compensation plus, (iii) such other benefits as are available under any Employer policy or practice then in effect. If Executive's employment is terminated by Executive other than for Good Reason as provided in subparagraph 7(e), all unvested stock options are forfeited on the Date of Termination and Executive shall have 90 clays from the Date of Termination to exercise any previously unexercised but then vested stock options. (d) By Executive for Good Reason; by Employer Without Cause. If Executive terminates his employment for Good Reason as provided in subparagraph 7(e) or if Executive's employment is terminated by Employer without Cause as provided in subparagraph 7(d), then Employer shall, through the Date of Termination, pay Executive (i) his accrued and unpaid Base Salary or, if applicable, his Adjusted Base Salary at the rate in effect on the date Notice of Termination is given, plus (ii) any accrued and unpaid Incentive Compensation and Pro Rata Incentive Compensation. Upon the Date of Termination, all unvested stock options and stock-based grants shall immediately vest and become exercisable, and Executive shall have one (1) year from the Date of Termination, or the remaining option term (not to exceed three (3) years), - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 18 if later, to exercise the stock options. For a period of three (3) years following the Date of Termination, Employer shall pay such health insurance premiums as may be necessary to allow Executive and Executive's spouse and other dependents to receive health insurance coverage substantially similar to coverage they received prior to the Date of Termination. In addition, subject to signing by Executive of a general release of claims in a form and manner satisfactory to the Executive and Employer: (1) Employer shall pay Executive, on the Date of Termination, such additional amounts to which Executive may be entitled in accordance with Employer's then current severance policies (the "Severance Amount"), provided that, at a minimum, Executive shall be entitled to receive an amount in a lump sum (the "Minimum Severance Amount") equal to the greater of(A) $3,000,000.00 or (B) three (3) times the sum of the "Applicable Base Salary" plus the "Average Incentive Compensation." For purposes of this Agreement, "Applicable Base Salary" shall mean the greater of (aa) $600,000, or, (bb) such of the following alternatives as is applicable: (aaa) prior to January 1, 2000, Executive's Base Salary, or if applicable, Adjusted Base Salary; or (bbb) on or after January 1, 2000, the average of the annual Base Salary and, if applicable, Adjusted Base Salary, payable to Executive for the year of termination and the immediately preceding complete fiscal year which he was employed by Employer. The fiscal year ending December 31, 1999, shall be treated as a complete fiscal year. For purposes of this Agreement, "Average Incentive Compensation" shall mean such of - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 19 the following alternatives as is applicable: (aaaa) prior to January 1, 2000, Executive's Target Incentive Compensation; (bbbb) on or after January 1, 2000, and before January 1, 2001, the sum of Executive's Incentive Compensation for the fiscal year ending December 31, 1999, and Executive's Target Incentive Compensation for the fiscal year ending December 31, 2000, divided by two (2); (cccc) on or after January 1, 2001, the total of the annual Incentive Compensation payable to Executive for the two (2) immediately preceding complete fiscal years divided by two (2). The fiscal year ending December 31, 1999, shall be treated as a complete fiscal year. The Applicable Base Salary and Average Incentive Compensation shall each be determined as of the date of Notice of Termination or the Termination Date, whichever is more favorable to Executive. Notwithstanding the foregoing, in the event Executive terminates his employment for Good Reason as provided in subparagraph 7(e), he shall be entitled to the Severance Amount or, if applicable, the Minimum Severance Amount only if he provides the Notice of Termination provided for in subparagraph 7(f) within one hundred and twenty (120) days after Executive has informed Employer in writing of the occurrence of the Good Reason Event(s), on which his termination is based, pursuant to the provisions of subparagraph 7(e). Should Executive commence any new employment as an employee during the twenty- - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 20 four (24) months following the Date of Termination, then Employer shall be entitled to (1) 50% of the lesser of (i) all Executive's Base Salary, or if applicable, Adjusted Base Salary in effect at the Date of Termination or (ii) all sums paid to Executive as base compensation for such new employment (but not as incentive or other compensation) within the first twelve (12) months following the Date of Termination; and (2) 25% of the lesser of (i) all Executive's Base Salary, or if applicable, Adjusted Base Salary in effect at the Date of Termination or (ii) all sums paid to Executive as base compensation for such new employer (but not as incentive or other compensation) within the second twelve (12) months following the Date of Termination. The provisions of the preceding sentence shall not, however, apply to payments of the "Parachute Amount" (as herein defined). (2) In addition to any other benefits to which Executive may be entitled in accordance with Employer's then existing severance plans, policies or practices (for which Executive shall not be required to sign the above- referenced general release of claims), Employer shall: (aa) for a period of three (3) years commencing on the Date of Termination, provide Executive, at Employer's expense, with an office and all reasonable occupancy expenses associated therewith, and related telephone and telefax facilities, and an assistant at a location of Executive's choosing, provided that the office facilities shall be comparable to Executive's office at Employer on the Date of Termination; and, (bb) for a period of one (1) year commencing on the Date of Termination, pay for the cost of executive outplacement services selected by Executive for use in connection with obtaining alternate employment. - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 21 (e) For Cause. If Executive's employment is terminated by Employer for Cause as provided in subparagraph 7(c), then Employer shall, through the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if applicable, his Adjusted Base Salary at the rate in effect on the date Notice of Termination is given, plus his accrued, earned and unpaid Incentive Compensation. (f) Continuing Assistance. Regardless of the reason for the termination of Executive's employment, for a period of five (5) years beginning on the Date of Termination or the end of the Period of Employment, Employer will provide such reasonable assistance and support to Executive or his estate as he or such estate shall reasonably require in connection with the preparation and filing of tax returns, statements, and forms insofar as such returns, statements, or forms relate to Executive's employment or other association with Employer, Previous Employer, or any of their respective predecessors or affiliates. At Employer's election, such assistance and support shall be provided by either tax personnel from Employer or certified public accountants selected and compensated by Employer. (g) Payment Place and Due Date. All amounts due under this Agreement to Executive or his estate by Employer following the Date of Termination or the end of the Period of Employment shall be due and payable in Dallas County, Texas. On or before the tenth (1 0th) day following such Date of Termination or the date upon which the end of the Period of Employment occurs, except as otherwise expressly set forth in this Agreement, Employer shall (i) escrow all amounts due to Executive or his estate for the severance amount or minimum severance amount whichever is applicable (the "Escrowed Severance Payment"), and (ii) pay to Executive or his estate all other amounts due to Executive or his estate. The Escrowed Severance Payment shall be due and payable to Executive or his estate without notice or demand - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 22 of any kind, in thirty-six (36) equal monthly payments, with the first such payment being due and payable thirty (30) days following the Date of Termination or the end of the Period of Employment, provided however: (aa) that in the event a payment of Escrowed Severance Payment is for any reason not paid within 10 days after Executive notifies Employer in writing of a failure to timely make such payment, then, in that event, without further notice or demand of any kind the entire unpaid balance of the Escrowed Severance Payment shall at once become due and payable in full to Executive or his estate, unless, prior to that time, Executive shall, after full and final hearing, be found to be in material breach of this Agreement by an arbitrator appointed under paragraph 18 of this Agreement, and (bb) advances of the payments of the Escrowed Severance Payment shall, if Executive so requests, be made to Executive to the extent income taxes on unpaid payments are reasonably determined by Executive to be due, with such advances to be proportionately offset against all unpaid future payments. If Executive so elects at any time, the unpaid balance of the Escrowed Severance Payment shall be paid over by Employer to an independent third party escrow keeper, to be held pursuant to written arrangements mutually acceptable to Employer and Executive providing for timely payment to Executive of the payments due therefrom, whereupon such escrowed funds shall no longer be an asset of the Employer. (h) Other Obligations. The foregoing subparagraphs 8(a) through 8(g) shall not adversely affect or alter Executive's rights (or the rights of his estate, spouse or other dependents) under any Employee Benefit Plan or other plans of Employer, except to the extent - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 23 otherwise expressly provided therein or in any agreement or other instrument attendant thereto. 9. Parachute Payment. The provisions of this paragraph 9 set forth the terms of an agreement reached between Executive and Employer regarding Executive's rights and obligations upon the occurrence of a "Change in Control" (as hereinafter defined) of Employer. These provisions are intended to assure and encourage in advance Executive's continued attention and dedication to his assigned duties and his objectivity during the pendency and after the occurrence of any such Change in Control. These provisions shall apply in lieu of, and expressly supersede, the provisions of subparagraph 8(d)( 1) if Executive's employment is terminated or Notice of Termination is given ninety (90) days prior to or within eighteen (18) months after the occurrence of an event constituting a Change in Control. (a) Escrow. Within fifteen (15) days after the occurrence of the first event constituting a Change in Control (irrespective of whether Executive has actual knowledge of such event), Employer shall place immediately negotiable funds in escrow in an amount equal to the Five Million Dollars ($5,000,000.00) attributable to subparagraph 9(c), plus such additional amount as equals the "Gross Up Payment" (as hereinafter defined) thereon. Such escrow shall be conducted pursuant to written arrangements that are mutually acceptable to Employer and Executive providing for the timely payment to Executive of the amounts held in such escrow in the event Executive becomes entitled thereto under the applicable provisions of this Agreement (the "Escrow Arrangement"). Further, the remaining portion of the "Parachute Amount" (as hereinafter defined) shall also, within such fifteen (15) days after the occurrence of the first event constituting a "Hostile Takeover" (as hereinafter defined), be funded by Employer in immediately negotiable funds into such escrow pursuant to such Escrow Arrangement. The Escrow Arrangement shall be maintained until the earlier of (A) nineteen (19) months after the - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 24 occurrence of an event constituting a Change in Control or (B) the payment to Executive of all sums escrowed. (b) Change in Control If, within 90 days prior to, or within eighteen (18) months after the occurrence of an event constituting a Change in Control, Executive's employment is terminated or a Notice of Termination is given for any reason other than (A) his death, (B) his Disability, or (C) by Executive Without Good Reason, then such termination shall be deemed to be a "Termination Due to Change in Control" (herein so called), in which event Employer shall pay Executive, in a lump sum, on or prior to the tenth (10th) day following the Executive's Date of Termination: (1) an amount equal to the applicable Parachute Amount (including any Gross Up Payment); and (2) Executive's accrued and unpaid Base Salary or, if applicable, his Adjusted Base Salary, through such Date of Termination; and (3) accrued and unpaid Incentive Compensation and Pro Rata Incentive Compensation. (c) Stock Option Floor. Upon the occurrence of the first event constituting a Change in Control, all stock options and other stock--based grants to Executive by Employer shall, irrespective of any provisions of the Option Agreement, immediately and irrevocably vest and become exercisable as of the date of such first event whereupon, at any time during the Option Term as defined in the Option Agreement (but not to exceed five (5) years after such event), Executive or his estate may by five (5) days' advance written notice given to Employer, and - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 25 irrespective of whether Executive is then employed by Employer or then living, and solely at the election of Executive or his estate, require Employer to: (1) immediately purchase all Stock Options from Executive or his estate in exchange for the sum of Five Million Dollars ($5,000,000.00) cash delivered in immediately negotiable funds in Dallas County, Texas, to Executive or his estate, or, (2) allow Executive to exercise all or any part of such Stock Options at the option prices therefor specified in the grant of the Stock Options. Employer shall also loan to Executive pursuant to the provisions of the Master Note otherwise referenced and described in this Agreement all funds due by Executive for income taxes (federal, state, or local), including but not limited to on capital gains as well as on ordinary income, by reason of the provisions of the existence of any of the provisions of this subparagraph 9(c) or the carrying out of all or any part of such provisions. Taxes for purposes of the above computation shall be computed at the highest marginal rate of federal income taxation for the tax year for which such taxes are or will be due, and state and local taxes at the highest marginal rate at the end of such year, net of the maximum reduction (if any) in federal income taxes that could be obtained from the deduction of deductible state and local taxes. (d) Gross Up Payment. (1) Excess Parachute Payment. If Executive incurs the tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986 (the "Code") on "Excess Parachute Payments" within the meaning of Section 280G(b)(l) of the Code, Employer will pay to Executive an amount (the "Gross Up Payment") such that the net amount retained by - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 26 Executive, after deduction of any Excise Tax on both the Excess Parachute Payment and any federal, state and local income tax (together with penalties and interest) as well as the Excise Tax upon the payment provided for by this subparagraph 9(d)(1), will be equal to the Parachute Amount. (2) Applicable Rates. For purposes of determining the amount of the Gross Up Payment, Executive will be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross Up Payment is to be made and state and local income taxes at the highest marginal rates of taxation in the state and locality where taxes thereon are lawfully due, net of the maximum reduction (if any) in federal income taxes that could be obtained from deduction of deductible state and `local taxes. (3) Determination of Gross Up Payment Amount. The determination of whether the Excise Tax is payable and the amount thereof will be based upon the opinion of tax counsel selected by Executive and approved by Employer, which approval will not be unreasonably withheld or delayed. If such opinion is not finally accepted by the Internal Revenue Service (or state and local taxing authorities), then appropriate adjustments to the Excise Tax will be computed and additional Gross Up Payments will be made in the manner provided by this subparagraph (d). (4) Payment. Employer will pay the estimated amount of the Gross Up Payment in cash to Executive at the time specified in this Agreement. Executive and Employer agree to reasonably cooperate in the determination of the actual amount of the Gross Up Payment. Further, Executive and Employer agree to make such adjustments to the estimated amount of the Gross Up Payment as may be necessary to equal the actual amount of the Gross - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 27 Up Payment, which in the case of Executive will refer to refunds of prior overpayments by Employer and in the case of Employer will refer to additional payments to Executive to make up for prior underpayments. (e) Definitions. For purposes of this paragraph 9, the following terms shall have the following meanings: "Change in Control" shall mean any of the following: (1) the acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (the "Acquiring Person"), other than Employer, or any of its Subsidiaries or any Investor or Excluded Group, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the combined voting power or economic interests of the then outstanding voting securities of Employer entitled to vote generally in the election of directors; provided however, that any transfer from any Investor or Excluded Group will not result in a Change in Control if such transfer was part of a series of related transactions the effect of which, absent the transfer to such Acquiring Person by the Investor or Excluded Group, would not have resulted in the acquisition by such Acquiring Person of 35% or more of the combined voting power or economic interests of the then outstanding voting securities; or (2) during any period of 12 consecutive months after the Issuance Date, the individuals who at the beginning of any such 12-month period constituted a majority of the Class A Directors and Class C Directors (the "Incumbent Non-Investor Majority") cease for any reason to constitute at least a majority of such Class A Directors and Class C Directors; provided that (i) any individual becoming a director whose election, or nomination for election by Employer's - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 28 stockholders, was approved by a vote of the stockholders having the right to designate such director and (ii) any director whose election to the Board or whose nomination for election by the stockholders of Employer was approved by the requisite vote of directors entitled to vote on such election or nomination in accordance with the Restated Certificate of Incorporation of Employer, shall, in each such case, be considered as though such individual were a member of the Incumbent Non-Investor Majority, but excluding, as a member of the Incumbent Non-Investor Majority, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of Employer (as such terms are used in Rule 14a-1 1 of Regulation 14A promulgated under the Exchange Act) and further excluding any person who is an affiliate or associate of an Acquiring Person having or proposing to acquire beneficial ownership of 25% or more of the combined voting power of the then outstanding voting securities of Employer entitled to vote generally in the election of directors; or (3) the approval by the stockholders of Employer of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the voting securities of Employer immediately prior to such reorganization, merger, or consolidation do not, following such reorganization, merger, or consolidation, beneficially own, directly or indirectly, more than 57.5% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of Employer resulting from such reorganization, merger, or consolidation; or (4) the sale or other disposition of assets representing 50% or more of the assets of Employer in one transaction or series of related transactions; or - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 29 (5) a "Fundamental Change in Business" as hereinafter defined. Except as otherwise specified herein, defined terms used in the definition of "Change in Control" shall have the same meaning as set forth in the Form of Certificate of Designation of Series B Convertible Preferred Stock of Wyndham International, Inc. "Employer" shall mean not only Wyndham International, Inc., but also its successors by merger or otherwise. "Fundamental Change in Business" shall mean that Employer, at any time, no longer earns at least fifty percent (50%) of its gross revenues from hotel, or hotel-related businesses. "Hostile Takeover" shall mean any Change in Control which at any time is declared by at least a majority of the Board, directly or indirectly, to be hostile or not in the best interests of Employer, or in which an attempt is made (irrespective of whether successful) to wrest control away from the incumbent management of Employer, or with respect to which the Board makes any effort to resist. "Parachute Amount" shall mean an amount equal to (i) the greater of $3,000,000.00 or the Severance Amount or, if applicable, the Minimum Severance Amount provided for in subparagraph 8(d)(1), plus (ii) any amount computed by reference to subparagraphs 9(c) or 9(d) of this Agreement or otherwise which are deemed to be a "Parachute Payment" within the meaning of Section 280G(b)(2) of the Code. 10. Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 30 delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed as follows: if to the Executive: At his home address as shown in Employer's personnel records; if to Employer: Wyndham International, Inc. 2001 Bryan Street, Suite 2300 Dallas, Texas 75201-3075 Attn.: General Counsel or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 11. Extended Leave of Absence (Family-Related Illness and Bereavement). Executive may, at Executive's option, during the Period of Employment, take a leave of absence for purposes of a family-related illness and/or bereavement. Such leave of absence may extend for an aggregate period during the life of this Agreement of up to twelve (12) months, plus any vacation available to him under this Agreement, during which time Executive shall be entitled to all benefits under this Agreement and any stock option agreement, including all compensation and rights of tenure and pursuant to paragraph 9 of this Agreement. Provided, however, Employer by action of a majority vote of the Board, may, if, by reason of such leave of absence, Executive shall have worked less than ten (10) calendar days (or any portion thereof) in any seventy (70) consecutive calendar day period, give Executive written notice of intent to appoint some other person as Chairman of the Board or Chief Executive Officer, and Executive must, within sixty (60) days of receipt of such notice, either elect to - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 31 return from such leave of absence, or accept the position of Chairman of the Board or the position of Chief Executive Officer for the remaining portion of the Period of Employment, at the same rate of compensation and with all the rights and benefits provided to Executive in this Agreement. Acceptance of the position of Chairman of the Board or Chief Executive Officer shall not constitute grounds for termination of this Agreement for Good Reason by Executive. 12. Tag Along and Piggyback Rights. Employer shall make best efforts to allow Executive an equitable opportunity to participate to the extent of any shares of stock he may then own in Employer or any affiliate of or successor to Employer (or have the right to own by the exercise of then vested options held by Executive) in any shelf offering, secondary offering, or follow-up offering. Any resulting costs for the registration of such shares of Executive shall be paid by Employer. Further, if at any time or times from and after the date hereof during the Period of Employment, Employer intends to file a registration statement for the registration of common stock with a governmental body permitting the registration of registrable stock, then Employer shall notify Executive at least thirty (30) days prior to each such filing of such intention to file such a registration statement. Such notice shall state the amount and type of securities proposed to be registered thereby, the underwriters involved, if any, and whether such underwriting is to be distributed on a firm commitment or best efforts basis. Upon the written request of Executive given within 20 days after receipt of any such notice stating the number of shares of registrable stock to be disposed of by the Executive and the intended method of disposition, Employer will use its best efforts to cause the aggregate of the registrable stock designated by Executive to be included in such registration so as to permit the disposition (in accordance with the methods specified by Executive) of the registrable stock so registered, subject to the following: (a) If the proposed registration involves an underwritten offering of common stock, - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 32 whether or not for sale for the account of Employer, to be distributed (on a best efforts or firm commitment basis) by or through one or more underwriters, and the managing underwriter of such underwritten offering shall advise Employer in writing that, in its opinion, the registration of all or a specified portion of registrable stock concurrently with the common stock will adversely affect the distribution of such common stock by such underwriters, then Employer may require, by written notice to Executive that the distribution of all or a specified portion of the registrable stock be excluded from such registration; (b) Employer may in its discretion withdraw any registration statement filed pursuant to this subparagraph subsequent to its filing and prior to its effective date without liability to the Executive; and (c) If the preferred stock series B shareholders of Employer restrict the registration of common shares of Employer held by other holders of common shares of Employer then, in that event, they may also so restrict to the same extent the registration rights hereunder of Executive. Employer shall, and hereby does, indemnify and hold harmless, to the extent permitted by law, Executive against all losses, claims, damages, liabilities, and expenses resulting from any untrue or misleading statement or alleged untrue or misleading statement of a material fact contained in any registration statement or prospectus (preliminary or otherwise), whether or not such untrue or misleading statement or. alleged untrue or misleading statement is caused by Executive's negligence, except in so far as such losses, claims, damages, liabilities, or expenses are caused by any untrue statement intentionally furnished or made by Executive. The foregoing indemnity is in addition to, and does not limit, Executive's right to indemnity, or actual indemnity provided by Employer, pursuant to the Indemnification Agreement, any Directors' and Officers' - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 33 insurance provided to Executive under paragraph 4 of this Agreement, or any other agreement or insurance. 13. Loans. (a) Existing Debt. Executive is currently indebted to Employer in the original principal amount of $4,904,573.00, which debt is witnessed by a promissory note, a duplicate of which is attached hereto as Exhibit C (the "Original Note"), and secured as set forth in the Original Note. All right, title, and interest in and to the Original Note is currently held by Employer, and the original of the Original Note is in the possession of Employer, having been heretofore duly endorsed by the payee therein named and delivered to Employer. Employer and Executive mutually recognize and agree that the Original Note is in good standing and ;that no payments have been heretofore made on the Original Note. Employer and Executive mutually desire to amend the provisions of the Original Note, and each herewith agrees that the Original Note is concurrently herewith and without further action amended to read as set forth in the attached Exhibit D (the "Amended Original Note"), which Amended Original Note is being concurrently herewith signed by Executive and delivered to Employer. The original of the Original Note is herewith delivered by Employer to Executive, marked cancelled; Employer and Executive agree that, as of this date, the Amended Original Note shall for all purposes be deemed effective as of the date of the Original Note. (b) Existing Debt Tax Loan. If, at the time of such repayment, Executive is employed by Employer, Employer shall loan to Executive or his estate such funds as are required to pay any income taxes due by reason of the repayment by Executive or his estate of the Original Note, as amended by the Amended Original Note, with the "Collateral" as such term is defined in the Amended Original Note attached hereto as Exhibit D. Such loan for income taxes - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 34 shall be unsecured and shall be due and payable in accordance with the "Master Note" (herein so called) hereinafter described and attached hereto as Exhibit E. (c) 1997 Salary Advance. The amount owed by Executive to Employer for a 1997 salary advance will be as of June 30, 1999, $421,214.02 (the "Salary Advance Balance"). The 1997 Salary Advance Balance will, contemporaneously herewith be deemed to be documented and made as of July 1, 1999, in accordance with the provisions of the Master Note hereinafter described, except that such amount shall be due and payable four (4) years from July 1, 1999. (d) Master Note Provisions. Attached hereto as Exhibit E is a non- negotiable and unsecured Master Note executed by Executive and payable to Employer. Without further action, all loans hereafter made by Employer to Executive pursuant to the provisions of this Agreement (other than the Original Note as amended by the Amended Original Note) shall be deemed to have been made pursuant to the provisions of the Master Note dated as of the date the funds are advanced for concerned loans (except as herein otherwise specified for the 1997 Salary Advance) and in the original principal amount equal to the amount of such funding and due and payable four (4) years from the date of the concerned advance. 14. Miscellaneous. No provisions of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by Executive and such officer of Employer as may be specifically designated by the Board. No waiver by either party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, unless specifically referred to herein, with respect to the subject matter hereof have been made by either party that are not set forth - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 35 expressly in this Agreement. The validity, interpretation, construction, and performance of the Agreement shall be governed by the laws of the State of Texas (without regard to principles of conflicts of laws) and, where applicable, the laws of the United States. 15. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. The invalid portion of this Agreement, if any, shall be modified by any court having jurisdiction to the extent necessary to render such portion enforceable. 16. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 17. No Mitigation. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced, regardless of whether the Executive obtains other employment, except strictly as provided in subparagraph 8(d)(i) of this Agreement. 18. Arbitration; Other Disputes. In the event of any dispute or controversy arising under or in connection with this Agreement, the parties shall first promptly try in good faith to settle such dispute or controversy by mediation under the applicable rules of the American Arbitration Association before resorting to arbitration. In the event such dispute or controversy remains unresolved in whole or in part for a period of thirty (30) days after it arises, the parties will settle any remaining dispute or controversy exclusively by arbitration in Dallas, Texas in accordance - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 36 with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. All administration fees and arbitration fees shall be paid solely by Employer. Notwithstanding the above, Employer shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of paragraph 5 or 6 hereof. The prevailing party may recover attorneys' fees in any dispute or controversy arising under or in connection with this Agreement. Should a dispute occur concerning Executive's mental or physical capacity as described in subparagraphs 7(b) or 8(b), a doctor selected by Executive and a doctor selected by Employer shall be entitled to examine Executive. If the opinion of Employer's doctor and Executive's doctor conflict, Employer's doctor and Executive's doctor shall together agree upon a third doctor, whose opinion shall be binding. Any amount to which Executive is entitled under this Agreement (including any disputed amount) which is not paid when due shall bear interest from the date due but not paid at a rate equal to the lesser of eighteen percent (18%) per annum or the maximum lawful rate. 19. Third-Party Agreements and Rights. Executive represents to Employer that upon Executive's execution of this Agreement, Executive's employment with Employer, and the performance of Executive's proposed duties for Employer, will not violate any obligations Executive may have to any employer prior to WHC, and Executive will not bring to the premises of Employer any copies of other tangible embodiments of non-public information belonging to or obtained from any such previous employment prior to WHC. 20. Legal Fees. Employer agrees to pay all legal fees incurred by the Executive in connection with the negotiation and preparation of this Agreement, up to a maximum of sixty thousand dollars ($60,000.00). - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 37 21. Litigation and Regulatory Cooperation. During and after Executive's employment, Executive shall reasonably cooperate with Employer in the defense or prosecution of any claims or actions now in existence or that may be brought in the future against or on behalf of Employer that relate to events or occurrences that transpired while Executive was employed by Employer; provided, however, that such cooperation shall not materially and adversely affect Executive or expose Executive to an. increased probability of civil or criminal litigation. Executive's cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of Employer at mutually convenient times. During and after Executive's employment, Executive also shall cooperate fully with Employer in connection with any investigation or review by any federal, state, or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while Executive was employed by Employer. Employer shall also provide Executive with compensation on an hourly basis calculated at his final Annual Base Salary, or if applicable, Annual Adjusted Base Salary divided by 2000 hours for requested litigation and regulatory cooperation that occurs after his termination of employment, and shall reimburse Executive for all costs and expenses incurred in connection with his performance under this paragraph 21, including, but not limited to, reasonable attorneys' fees and costs. 22. Conflicts. In the event of any conflict between the provisions of this Agreement and the Option Agreement, any other option granted heretofore or hereafter made, or any agreement between Executive and Employer heretofore executed, this Agreement shall govern and rule supreme. 23. Note prepayment. Executive shall, at the time of receipt of same, pay to Maker as payment on the Master Note (but not on the Amended Original Note) to the extent such Master - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 38 Note is unpaid, twenty-five percent (25%) of the after tax Incentive Compensation and a total of fifty percent (50%) of any after tax gain received as the result of the exercise and sale of any options provided to Executive under the Option Agreement. For purposes of this paragraph, Executive will be deemed to pay federal income taxes at the highest marginal rate of federal taxation in the applicable calendar year and state and local taxes at the highest marginal rates of taxation in the state and. locality where taxes thereon are lawfully due, net of the maximum reduction (if any) in federal income taxes that could be obtained from deduction of deductible state and local taxes. 24. Effective Date. This Agreement is effective April 19, 1999. IN WITNESS WHEREOF, the parties have executed this Agreement effective on the date and year above written. WYNDHAM INTERNATIONAL, INC. By: /s/ CARLA S. MORELAND -------------------------------------------- Carla S. Moreland Its: Executive Vice President - General Counsel /S/ JAMES D. CARREKER ------------------------------------------------ James D. Carreker - -------------------------------------------------------------------------------- EXECUTIVE EMPLOYMENT AGREEMENT Page 39 EX-10.4 5 LETTER AGREEMENT WITH KARIM ALIBHAI EXHIBIT 10.4 [LETTERHEAD APPEARS HERE] July 7, 1999 Mr. Karim Alibhai 10777 Westheimer Suite 1000 Houston, TX 77042 Dear Karim: This letter agreement (the "Agreement") confirms the agreement that we have reached regarding your resignation from your regular, full-time employment and all offices you held with Wyndham International, Inc. ("WII") and its related and affiliated entities (collectively, "Wyndham"). This Agreement does not constitute and should not be construed as an admission by Wyndham or Patriot American Hospitality, Inc. ("PAHI") and its related and affiliated entities (collectively with PAHI, "Patriot") (Wyndham and Patriot, collectively hereinafter referred to as the "Companies") that they have in any way violated any legal obligation that they owe to you or to any other person or as an admission by you that you have in any way violated any legal obligation that you owe to the Companies or to any other person. To the contrary, the parties' willingness to enter into this Agreement demonstrates that they are continuing to deal with each other fairly and in good faith. With those understandings and in exchange for the promises set forth below, you and the Companies agree as follows: 1. Resignation ----------- You hereby confirm that you resigned as an employee of WII effective as of June 30, 1999 (the "Resignation Date"). You also hereby confirm that you resigned from your offices of President and Chief Operating Officer of WII and any and all employment, offices and board of directors seats (other than your directorship on WII's Board) that you held with any of the other Companies as of the Resignation Date. The Companies hereby confirm that said resignations were accepted by the Companies. WII agrees to nominate you as a Class 3 Director for the Board of Directors of WII ("Board") in connection with the merger of WII and PAHI. In the event that the Board establishes and delegates certain of its authority to an executive committee of the Mr. Karim Alibhai July 7, 1999 Page 2 Board, WII shall recommend and support your candidacy for a seat on such committee to the extent that the structure of such a committee so permits. 2. Compensation and Benefit ------------------------ (a) Repricing of Outstanding Options. As of June 1, 1999, all of your -------------------------------- outstanding options to purchase 601,065 paired shares of the common stock of WII and PAHI ("Paired Shares") hereby are canceled, and in lieu thereof you are granted fully vested new options to purchase 100,000 shares of common stock of WII (formerly denominated as Paired Shares) at a purchase price of $5. 1875 per share (the "New Options"). The New Options shall remain fully exercisable until June 30, 2002 and otherwise shall remain subject to the terms of paragraphs 2(c), 2(d), 7, 8, 9, 11, 12, and 14 of the Patriot American Hospitality Operating Company Non-Qualified Stock Option Agreement dated as of June 12, 1998 by and between you and PAHI. (b) Pro Rata Bonus. The Companies agree to pay you, on or within a -------------- reasonable time after the annual compensation determination date established by the Board, a lump sum of One Hundred Eighty-Thousand Dollars ($180,000) as a pro rata incentive bonus for 1999. (c) Benefit Continuation. You may continue to participate in WII's -------------------- group health, dental, life and disability insurance plans in which, and to the same extent as, you are currently participating for up to two (2) years from the Resignation Date, with the cost of the regular premium for such benefits shared in the same relative proportion by you and WII as in effect for senior executives of WIT on the Resignation Date; provided that nothing in this Section -------- 2(c) shall be construed to affect your or your dependents' rights thereafter (i) to receive continuation coverage to the extent authorized by and consistent with 29 U.S.C. (S) 1161 et seq. (commonly known as "COBRA") and applicable group health and dental plan terms, or (ii) convert your coverage under the life and disability plans to individual coverage to the extent authorized by and consistent with applicable group life and disability plan terms, in all cases entirely at your or their own cost after your right to cost sharing under this Section 2(c) ends. (d) Office. WII shall continue to provide you with the use of one ------ support staff member through December 31, 1999 (Natalie Dixon to the extent she remains employed by WII). WII shall make a suitable office at its corporate headquarters available to the assigned support staff member through December 31, 1999. Mr. Karim Alibhai July 7, 1999 Page 3 (e) Hotel Suite. WII shall make Suite 1013 at the Grand Bay Miami ----------- available to you for your use through November 21, 1999. (f) Other Benefits. Except as expressly provided above, your -------------- eligibility to participate in any of the Companies' respective employee benefit plans and programs ceases on or after the Resignation Date in accordance with the terms and conditions of each of those benefit plans and programs and your rights to benefits under any of the employee benefit plans and programs, if any, are governed by the terms and conditions of each of those employee benefit plans and programs. 3. Release of Claims ----------------- (a) Release by Mr. Alibhai. You voluntarily and irrevocably release ---------------------- and discharge the Companies, their related or affiliated entities, and their respective predecessors, successors, and assigns, and, solely in their respective capacities as such, the current and former officers, directors, shareholders, employees, and agents of each of the foregoing (any and all of which are referred to as "Releasees") generally from all charges, complaints, claims, promises, agreements, causes of action, damages, and debts that relate in any manner to your employment with or services as an employee for the Companies, known or unknown ("Claims"), which you have, claim to have, ever had, or ever claimed to have had against any of the Releasees through the date on which you execute this Agreement. This general release of Claims includes, without implication of limitation, all Claims for or related to: the Employment Agreement; the compensation provided to you by the Companies; your resignations as described in Section 1; wrongful or constructive discharge; breach of contract; breach of any implied covenant of good faith and fair dealing; tortious interference with advantageous relations; intentional or negligent misrepresentation, fraud or deceit; infliction of emotional distress, and unlawful discrimination under the common law or any statute (including, without implication of limitation, the Employee Retirement Income Security Act, Title VII of the Civil Rights Act of 1964, the American with Disabilities Act, Tex. Lab. Code (S) 21.001, et seq., and Tex. Hum. Res. Code (S) 121.001, et seq.). You also waive any Claim for reinstatement, severance, incentive or retention pay (except as expressly provided in this Agreement), attorney's fees, or costs, relating to the Claims. You agree that you will not hereafter pursue any Claim against any Releasee by filing a lawsuit in any local, state or federal court for or on account of anything which has occurred up to the date on which you execute this Agreement as a result of your employment, and you shall not seek reinstatement with, or damages of any nature, severance, incentive or retention pay, attorney's fees, or costs from the Companies or any of the other Releasees; provided, however, -------- that nothing in this general release shall Mr. Karim Alibhai July 7, 1999 Page 4 be construed to bar or limit your rights, if any, to indemnification subject to and in accordance with the terms of the By-Laws of WII and the Indemnification Agreement, dated as of May 23, 1998, by and among you, WII and PAHI (the "Indemnification Agreement"), or to enforce your rights under this Agreement. (b) Release by the Companies. The Companies, on behalf of themselves ------------------------ and their respective predecessors, successors, assigns, directors (but only in their capacities as directors of the Companies) and officers (but only in their capacities as officers of the Companies) voluntarily and irrevocably release and discharge you and your successors, assigns, heirs and survivors from any and all charges, complaints, claims, promises, agreements, causes of action, damages and debts (including attorney's fees and costs actually incurred) which any of them have, claim to have, ever had or ever claimed to have had against you through the date hereof, that are known to the Companies or that presently are not actually known to senior management of the Companies but that directly or indirectly arise out of, relate to or concern good faith acts or omissions by you during the course of your employment undertaken or not undertaken in the reasonable belief that such acts or omissions were in or not opposed to the best interests of the Companies ("WII Claims"). The Companies further represent that they do not have any knowledge at this time of any acts or omissions by you that would give rise claims not otherwise released in the previous paragraph. 4. Employment Agreement -------------------- This Agreement supersedes all provisions of the Employment Agreement other than Paragraphs 4, 5 (as amended and restated hereinbelow), 8(c), 13 and 15 thereof. Paragraphs 4, 5 (as amended and restated hereinbelow), 8(c), 13 and 15 of the Employment Agreement are incorporated herein by reference and shall continue to bind you in accordance with their respective terms. The parties hereby agree that Paragraph 5 of the Employment Agreement, however, is incorporated herein only to the extent amended and restated as follows: The provisions of this Paragraph 5 shall apply during Executive's employment with the Company and for a period of twelve (12) months thereafter. In consideration for Executive's employment by the Company under the terms provided in this Agreement and as a means to aid in the performance and enforcement of the terms of the Unauthorized Disclosure provisions of Paragraph 4, Executive agrees that Executive will not, directly or indirectly, solicit or induce any present or future employee of the Company or Affiliated Company to accept employment with Executive or Mr. Karim Alibhai July 7, 1999 Page 5 with any business, operation, corporation, partnership, association, agency, or other person or entity with which Executive may be associated, and Executive will not employ or cause any business, operation, corporation, partnership, association, agency, or other person or entity with which Executive may be associated to employ any present or future employee of the Company or Affiliated Company without providing the Company or Affiliated Company with ten (10) days' prior written notice of such proposed employment. Should Executive violate the provisions of this Paragraph 5, then in addition to all other rights and remedies available to the Company or Affiliated Company at law or in equity, the duration of this covenant shall automatically be extended for the period of time from which Executive began such violation until he permanently ceases such violation. The parties further agree that Paragraph 8(c) (Gross Up Payment) of the Employment Agreement shall be applied with respect to the payments to you under this Agreement if such payments results in an Excise Tax (as defined in the Employment Agreement). The Employment Agreement, except for Paragraphs 4, 5 (as amended and restated herein), 8(c), 13 and 15 thereof, shall terminate on the Resignation Date. 5. Return of Property ------------------ All documents, records, material and all copies of any of the foregoing pertaining to Confidential Information (as defined in Paragraph 4 of the Employment Agreement), and all software, equipment, and other supplies, whether or not pertaining to Confidential Information, that have come into your possession or been produced by you in connection with your employment ("Property") have been and remain the sole property of the Companies. You confirm that you have returned all Property to the Companies, except for the notebook computer currently in your possession. The Companies agree that you may keep the notebook computer, so long as you first permit the Companies to remove any Confidential Information from it. In no event should this provision be construed to require you to return to the Company any document or other materials concerning your remuneration and benefits during your employment with the Companies. The Companies agree to return to you, promptly upon your request, such of your property as may be in the possession of any of the Companies. Mr. Karim Alibhai July 7, 1999 Page 6 6. Nondisparagement ---------------- You agree not to take any action or make any statement, written or oral, which disparages or criticizes the Companies or their respective officers, directors, agents, or management and business practices, or which disrupts or impairs the Companies' normal operations. The Companies, on behalf of themselves, agree (a) not to take any action or make any statement, written or oral, which disparages or criticizes you or your management and business practices, and (b) to instruct their respective directors and officers not to take any action or make any statement, written or oral, which disparages or criticizes you or your management and business practices. The provisions of this Section 6 shall not apply to any truthful statement required to be made by you or the Companies, as the case may be, in any legal proceeding or governmental or regulatory investigation. You shall be entitled to review and approve, which approval shall not be unreasonably withheld, the content of any press release or other public statement issued by the Companies concerning your resignation and participate in the transaction call announcing your resignation. 7. Additional Representations. Warranties and Covenants ---------------------------------------------------- (a) As a material inducement to the Companies to enter into this Agreement, you represent, warrant and covenant as follows: (i) You have not assigned to any third party any Claim released by this Agreement. (ii) You have not heretofore filed with any agency or court any Claim released by this Agreement. (b) As a material inducement to you to enter into this Agreement, the Companies represent, warrant and covenant as follows: (i) The Companies have not assigned to any third party any WII Claims released by this Agreement; and (ii) The Companies have not heretofore filed with any agency or court any WII Claims released by this Agreement. Mr. Karim Alibhai July 7, 1999 Page 7 8. Further Assurances ------------------ Upon the terms and subject to the conditions herein provided, each of the parties hereto agrees to use its reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. 9. Exclusivity ----------- This Agreement sets forth all the consideration to which you are entitled from the Companies by reason of your resignation and the consummation by the Companies of any strategic restructuring or transaction, and you shall not be entitled to or eligible for any payments or benefits under any other Company severance, bonus, retention or incentive policy, arrangement or plan. 10. Tax Matters ----------- All payments and other consideration provided to you pursuant to this Agreement shall be subject to any deductions, wititholding or tax reporting that the Companies reasonably determine to be required for tax purposes. 11. Acknowledgment -------------- WII hereby acknowledges that a significant portion of the services performed by you on behalf of WII since January 1, 1998 was attributable to pursuing WII's and its related and affiliated entities' interests outside of the United States, including oversight of Arcadian, WII's United Kingdom-based operating division, and that such services included oversight of operations, acquisitions and strategy development for such foreign operations. 12. Arbitration of Disputes ----------------------- Any controversy or claim arising out of or relating to this Agreement or the breach thereof shall, to the fullest extent permitted by law, be settled by arbitration in accordance with Paragraph 13 of the Employment Agreement. This Section 12 shall be specifically enforceable. Notwithstanding the foregoing, this Section 12 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction in circumstances in which such relief is appropriate; provided that -------- any other relief shall be pursued through an arbitration proceeding pursuant to this Section 12. Mr. Karim Alibhai July 7, 1999 Page 8 13. Consent to Jurisdiction ----------------------- To the extent that any court action is permitted consistent with or to enforce Section 12 of this Agreement, the parties hereby consent to the jurisdiction of the state and federal courts in or for Dallas, Texas. Accordingly, with respect to any such court action, you and the Companies (a) submit to the personal jurisdiction of such courts; (b) consent to service of process; and (c) waive any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process. 14. Notices. Acknowledgments and Other Terms ---------------------------------------- (a) You are advised to consult with an attorney before signing this Agreement. (b) You acknowledge and agree that the Companies' promises in this Agreement constitute consideration in addition to anything of value to which you are otherwise entitled by reason of the termination of your employment. (c) By signing this Agreement, you acknowledge that you are doing so voluntarily and knowingly, fully intending to be bound by this Agreement. You also acknowledge that you are not relying on any representations by any representative of the Companies concerning the meaning of any aspect of this Agreement. You understand that this Agreement shall not in any way be construed as an admission by the Companies of any liability or any act of wrongdoing whatsoever by the Companies against you and that the Companies specifically disclaim any liability or wrongdoing whatsoever against you on the part of themselves and their respective officers, directors, shareholders, employees and agents. (d) In the event of any dispute, this Agreement will be construed as a whole, will be interpreted in accordance with its fair meaning, and will not be construed strictly for or against either you or the Companies. (e) The laws of the State of Texas will govern any dispute about this Agreement, including any interpretation or enforcement of this Agreement. (f) In the event that any provision or portion of a provision of this Agreement shall be determined to be illegal, invalid or unenforceable, the remainder of this Agreement shall be enforced to the fullest extent possible and the illegal, invalid or unenforceable provision or portion of a provision will be amended by a court of Mr. Karim Alibhai July 7, 1999 Page 9 competent jurisdiction to reflect the parties' intent if possible. If such amendment is not possible, the illegal, invalid or unenforceable provision or portion of a provision will be severed from the remainder of this Agreement and the remainder of this Agreement shall be enforced to the fullest extent possible as if such illegal, invalid or unenforceable provision or portion of a provision was not included. (g) This Agreement may be modified only by a written agreement signed by you and authorized representatives of the Companies. (h) This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements between the parties with respect to any related subject matter; provided, that the Indemnification Agreement shall remain in full force and - -------- effect in accordance with its terms. (i) This Agreement shall be binding upon each of the parties and upon their respective heirs, administrators, representatives, executors, successors and assigns, and shall inure to the benefit of each party and to their heirs, administrators, representatives, executors, successors, and assigns. (j) This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement. Mr. Karim Alibhai July 7, 1999 Page 10 If you agree to these terms, please sign and date below and return this Agreement to the General Counsel of WII. Sincerely, WYNDHAM INTERNATIONAL, INC. By: /s/ JAMES D. CARREKER ------------------------------------- James D. Carreker Chairman and Chief Executive Officer PATRIOT AMERICAN HOSPITALITY, INC. By: /s/ JAMES D. CARREKER ------------------------------------- James D. Carreker Chief Executive Officer Accepted and agreed to: /s/ KARIM ALIBHAI - ----------------------- ---------------------------------------- Karim Alibhai Date EX-27.1 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998 AND THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998 OF WYNDHAM INTERNATIONAL, INC. 1,000 9-MOS 9-MOS DEC-31-1999 DEC-31-1998 JAN-01-1999 JAN-01-1998 SEP-30-1999 SEP-30-1998 216,084 158,954 0 0 198,813 194,583 0 0 23,832 23,583 465,255 35,346 5,936,881 5,838,196 438,644 252,580 7,071,509 7,415,670 404,683 1,614,967 0 0 0 0 102 90 1,672 4,270 2,308,942 2,598,677 7,071,509 7,415,670 0 0 1,901,509 1,426,080 0 0 0 0 1,899,981 1,284,086 0 0 266,678 172,191 (262,150) (22,822) (651,053) (11,273) 0 0 0 0 (9,838) (31,817) 0 0 (921,223) (67,257) (6.06) (0.54) (6.19) (1.46)
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